UK PM Johnson Survived No-Confidence Vote; GBP/USD Volatile

PM Johnson Survived the No-Confidence Vote

On Monday morning and as British MPs were returning from the Queen's Platinum Jubilee holiday, the Chairman of Tory 1922 Committee announced that the MPs of the Party would hold a no-confidence vote in their leader, in the aftermath of the "party-gate" saga.

The vote took place on the same day and Mr Johnson won, since 211 of his MPs voted in his favor and 148 against him, giving him a 59% support. As such, he remains in place as Conservative leader and Prime Minister. ^[1]

Under the rules of the Conservative party, Mr Johnson cannot face another such vote of confidence from the party's Members of the Parliament for one year.

PM Johnson hailed his victory, describing the result a "convincing" and "decisive". He also said that it allows the government to "move on and focus on the staff I think really matters to people". ^[2]

Opposition leader Keir Starmer on the other hand, lambasted Tory MPs for the decision to back Mr Johnson, saying that they "have ignored the British public", adding the the public "are fed-up" with the Prime Minister. ^[3]

Political Uncertainty Ahead?

Mr Johnson may have come out of the challenge victorious and called the outcome "convincing", but 148 of his MPs voted that they don't have confidence in him. This reveals a divided Conservative party and could potentially make it difficult for him to push his agenda through the Commons.

Furthermore, his 59% victory in yesterday's vote, is smaller than the 63%, his predecessor Ms May had won in a similar vote back in December 2018. ^[4]

Ms May had survived the no-confidence vote, but was unable to bridge the rift over Brexit and eventually stepped down a few months later, in July 2019, succeeded by Mr Johnson.

GBP/USD Analysis

The current week has been volatile as market try to shake-off last week's risk-aversion, but remain on edge. Furthermore, the RBA's aggressive 50 basis point hike earlier today, seems to have sparked some renews fears over inflation, as markets brace the latest CPI data from the US on Friday. The pair seems to be more affected by the broader market mood and less than the no-confidence vote and its outcome.

GBP/USD, had managed to post profits yesterday despite the two-way action, while today it remains volatile, as it covers most of the earlier losses. This can give it the chance push back above the EMA200, but it does not inspire much confidence at this stage, for taking out the 38.2% Fibonacci of the 2022 High/Low drop (1.2763). More to it, a thick daily Ichimoku Cloud looms large.

The Pound's recent visit above the EMA200 however had been short-lived and as long as it stays below it, risk is tilted to the downside. As such we can see further pressure and a breach of 1,2410-00, although a catalyst would be needed for a larger decline that towards and below 1.2276.