Boris and Betty: Trading GBP amid political armageddon
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Summary…
UK Prime Minister Boris Johnson announced his resignation this morning after another wave of cabinet departures overnight made his position untenable.
He will remain in his post until a new leader is appointed no later than the Conservative Party’s annual conference in October. Parliament is due to break up for summer recess on July 21 so the process may have to be expedited. How long the process takes depends on how many candidates come forward for the role, but it will provide a period of headline risk affecting GBP/USD.
As he continued to lurch from one crisis to another the GBPUSD, (colloquially known as Betty from Cockney rhyming slang for cable – Betty Grable), took a battering. As the political landscape in the UK deteriorated the currency bore the brunt of the upheaval. A currency’s value is influenced by more than just economic factors like interest rates and inflation. Even the most experienced market players can get outflanked by political influence on currency trading.
Knowing how politics works in relation to foreign exchange markets can be useful when it comes to your trading decisions. Countries that have strong political stability are far more attractive to foreign investors. As such political stability can have a dramatic effect on currency rates. Serious inquiries into government conduct can destabilise the economy and weaken the currency.
This article was written by Ryan Paisey at www.forexlive.com.