BRITISH POUND KEY POINTS:
- GBP/USD[1] rises after UK Prime Minister Boris Johnson announces his resignation
- Although political uncertainty may cause volatility from time to time, it is unlikely to become the main driver of sterling in the short term
- The Bank of England's monetary policy and the UK macroeconomic outlook should be more relevant for the pound[2] during the second half of the year
Most Read: US Dollar Price Action Setups: EUR/USD, GBP/USD, USD/CAD, USD/JPY[3]
The British Pound traded moderately higher against the U.S. dollar[4] on Thursday, up about 0.65% to 1.2000, despite heightened political uncertainty in the UK after Boris Johnson announced his resignation as Prime Minister[5] following several scandals that plagued his administration over the past few months. Traders and investors had already anticipated this move after dozens of senior ministers stepped down[6] in recent days in protest over Johnson's leadership and his handling of allegations of misconduct against a prominent ally, so the formal announcement did not spark FX turbulence.
While the process of selecting the next head of government may trigger volatility from time to time, it will not be the main driver of sterling. It is true that a new prime minister could open the door to some fiscal stimulus in the form of tax cuts later in the year and pave the way for a more aggressive central bank, but this will be a theme for the fall.The new resident of 10 Downing Street could also adopt a less confrontational stance toward the European Union, creating a more favorable environment for sterling; but again, there are too many unknowns at this point to draw any major conclusions.
Looking ahead, growing headwinds on the macro front for
