Pound Slips As Boris Johnson Storms Ahead

Fiona Cincotta CityIndex

The pound pared earlier gains as no deal Brexit returns to haunt investors. Boris Johnson, who favours Brexit come rain or shine, deal or no deal, stormed ahead in the first round of votes in the Tory leadership battle. Winning 114 votes to Jeremy Hunt’s 43 puts Boris as the firm favourite to win the leadership battle and replace Theresa May as Prime Minister. Pound traders are less than thrilled at the prospect of Boris Johnson taking the helm, particularly after Parliament blocked an attempt by Labour to prevent a no deal Brexit.

With Johnson in the lead, the pound will struggle to make any meaningful moves higher. Given that he is the polls favourite to win, we don’t envisage any large scale sell off for the time being, his victory is now pretty much baked into the price. That said, Boris does have the power to send the pound back towards $1.20 should he regain his enthusiasm for a no deal Brexit.

Oil jumps 4% amid elevated Middle East tensions

Oil remained elevated, gaining up to 4% at its high, as investors reacted to attacks on vessels in the Strait of Hormuz. The attacks are the second this month close to this strategic shipping route for oil. Around 30% of the world’s oil passes along this route, so oil prices will be particularly sensitive to disruptions in the region. Should these waters become unsafe, a worst-case scenario would have a serious impact on oil supply.

Tensions have been rising in the Middle East since President Trump slapped crippling sanctions on Iran in an attempt to curb Tehran’s nuclear ambitions. As tensions in the Middle East bubble, this is unlikely to be the last incident of this nature. Whilst oil traders had been focusing on demand issues over the past few weeks amid ongoing US – Sino trade tensions and the prospect of a global downturn, today’s event has put the supply side of the equation firmly back in the driving seat.

Author

Fiona Cincotta

CityIndex

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.