Boris Johnson has finally been announced as the new 10 for Great Britain after being elected leader of the conservative party today at 10:45am GMT. While the formal takeover is scheduled for tomorrow, Wednesday, the 24th of July, he inherits multitudes of problems, particularly the European Crisis. Previously, Johnson has been vocal about leaving the EU at the end of the Article 50 extension period no matter what the weather in Westminster and Brussels on October 31.
The announcement has rocked the sterling pound with it back to $1.245, near the last week 27 month low of $1.238 and is set to continue on the defensive. The pound has depreciated in the past 11 weeks out of 12. Several key leaders have resigned their positions notably the Foreign Minister Sir Alan Duncan announcing his resignation earlier. Investors are set to watch out for further resignations as Johnson looks to force Britain out of the EU the hard way.
With the do or die approach, an end to the current weakening period looks unlikely. With crunch autumn on the horizon, it could mean downward pressure towards 1.2000-level with sterling already surpassing 1.25000-level. In fact, a 3.7% fall of the pound against the US Dollar has been consistent in the past three months.
Market experts have been busy buying options since May to make up for losses due to the looming no-deal Brexit outcome and have consolidated positions according to the three-month sterling risk-reversals as shown in the graph, which depict demand for buy and sell options for the Pound.
The sterling has frequently been trading at crisis levels but analysts do not expect it go much lower with many aspects to consider for Boris Johnson when he takes over. Brexit, relations with United States of America and Trump, the tensions with Iran and China, as well as life beyond Brexit, will be just the key decisions he’ll have to make in his first few days.