It’s going to be quite the scene if Boris Johnson doesn’t end up winning
The pound is holding at the lows for the day with cable slipping to 1.2462 following the news that Sir Alan Duncan has resigned as foreign office minister. To some extent, it’s not exactly a post he excelled at (EU negotiations) or one that someone is craving for now (Iran tensions) so the timing is a bit convenient.
However, this holds more repercussions in the bigger picture should we see Boris Johnson come out victorious tomorrow. UK finance minister Philip Hammond has already made his decision clear that he will be among the first to go should that happen.
As for cable price action, we’ve approached a key level on the day as price looks to be challenging a break below the 100-hour MA (red line) @ 1.2469. Should sellers manage that, further support is seen closer to 1.2450 before we move towards a potential test of the 1.2400 handle once again.
The potential future resignations on a Boris Johnson leadership won’t lend much positive headlines as it threatens political uncertainty but essentially it doesn’t change much unless there is significant in-party fighting among Tory lawmakers that will culminate in a leadership vote against Johnson – which I don’t see happening.
Otherwise, just pay attention to how Johnson is going to navigate through this whole Brexit ordeal in the coming months.
Oh, the caveat among all of this is assuming he wins the premiership race. Let’s not forget that Hunt is still in the running here. Should he succeed in upsetting Johnson when the result is announced tomorrow, expect significant upside for the pound as shorts get squeezed. I reckon we could easily see cable rise towards 1.2600 at least.