The conservative party has elected Boris Johnson as their new leader through vote and he becomes the new Prime Minister for Britain. Now Pound will be saved by him?
No – deal Brexit:
Boris Johnson before the election insisted that Brexit will happen without any deal. In No-deal agreement when Mrs. May was Prime Minister she signed with Irish backstop.
Irish backstop: It means earlier Britain and Irish where under EU and so there was no customs check. Now because of Irish backstop the products will have a border check by customs.
This was not accepted by Tory members fearing that indirectly they are trapped by European Union. But the traders and Irish people are with the agreement and supported Mrs. May. But the Tory members voted against it and made the referendum to a failure. This cost Mrs. May to resign from her post.
Now Johnson wants to remove the backstop and ready to sign the no-deal but EU is not ready to renew the agreement. So, if the no-deal brexit happens then pound will have parity with Euro and Dollar. If Johnson changes his plan for Brexit the Pound will trade higher.
Election and Interest rate:
Most of the analysts predict an earlier election before Brexit will help the pound to trade higher at above 1.3 against dollar. Now it’s trading at 1.21. Boris Johnson also insisted for earlier election while speaking to a reporter.
The U.K economy is looking good at present, as the wages are moving up. The fear factor is inflation which is at 4%. So the Bank of England must hold the interest rate instead of going for rate cut. Last week Bank of England released the refinancing rate which was maintained on hold.
With the UK’s ongoing no-deal Brexit process, several financial institutions had moved their assets to European cities in order to save their market capacity in the EU.
Several institutions, such as Bank of America, Barclays, Goldman Sachs and Morgan Stanley, have prepared their Europe hub and shifted hundreds of billions of assets out of the UK to Ireland, Germany and France.