GBP Boosted as PM Johnson Returns
GBP seems to have gotten another “Boris bounce” today, with GBPUSD trading some 50 pips higher at times. Exactly one month after Johnson first went into isolation due to Covid-19, the PM has retaken the reins at No.10 Downing Street.
In his widely watched first speech back, the PM praised the national response to the virus, saying that the UK is close to having the outbreak under control.
He acknowledged the economic damage caused by lockdowns, saying that he could see the “consequences” of a lockdown.
In recent weeks, the Government has faced intense pressure from within the Conservative Party and from business groups to ease lockdowns to save the economy.
However, the PM appeared to push back against this pressure; He then urged people not to relax the social-distancing efforts that had achieved this just yet, calling now the moment of “maximum risk”.
Moreover, he urged that we must recognise the risk of a second spike in Covid-19 cases and insisted that now is not the time to ease lockdowns as we cannot let R-rate go over 1 (as in, each infected person infects more than one other person on average).
GBP had been given a boost by a weekend report from the Telegraph. The report said that, amid intense pressure from important members within the Conservative Party to save the economy, the PM might consider easing lockdown restrictions as early as this week.
An early easing of lockdown restrictions would be beneficial to the UK economy, hence the boost to GBP.
However, GBP did not fall when the PM came across as more reluctant to ease restrictions than the weekend article implied. In fairness, the PM did say that once officials are sure the virus is under control, there would be a “second phase” in which restrictions will be eased -- even as efforts continue to suppress the disease. He said he couldn’t offer more details on this, but promised to bring in opposition political parties and make decisions with “maximum possible transparency.”
Maybe just the knowledge that an easing of restrictions is on the way has kept GBP traders on the bid then. More than anything, there is just a sense that markets are relieved that the main man is back in control.
General USD weakness today is also a factor in GBP’s solid performance today; the safe-haven USD has been a sell for most of the day, as market sentiment took a turn for the better amid focus on lockdowns being eased in Europe and better Covid-19 numbers.
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