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Pound US Dollar Exchange Rate News: GBP/USD Strengthens as Boris Johnson to Face No-Confidence Vote

June 6, 2022 - Written by John Cameron

Pound (GBP) Firms in the Face of No Confidence Vote

The Pound (GBP) is trading positively this morning following the news that Boris Johnson will face a vote of no confidence later this evening. A spokesperson for Johnson said:

‘The PM welcomes the opportunity to make his case to MPs and will remind them that when they're united and focused on the issues that matter to voters there is no more formidable political force.’

GBP investors are confident that Johnson will win the vote, ending speculation regarding Johnson’s leadership amid the fallout from the ‘partygate’ scandal, while also protecting him from another no-confidence vote for a year. Assuming Johnson wins the vote of no-confidence, the Pound could extend these gains this evening. But the alternative could see the political volatility weigh heavy on Sterling.

Sir Keir Starmer has called on Tory MPs to ‘show some leadership’ and to remove Johnson:

‘I think they have got to show some leadership and vote against the Prime Minister. He has lost, I think, the trust of the country – that is pretty clear from the evidence that I have seen.

‘He’s also got no plan for the country, and I think those two things mean that it’s in the national interest that he goes now.’

US Dollar (USD) Softens as Risk-Sentiment Improves

The US Dollar is struggling to find much support this morning amid risk-positive developments in the market deter investors from safe-haven currencies.

China has confirmed that Beijing residents will be able to return to work from today, and children will resume the school term from 13th June. The expected end to Covid restrictions across major hubs in China is underway, a welcome boost to the global economy.

Further buoying market sentiment and dampening the appeal of the ‘Greenback’ today is the news that US President Joe Biden is planning on easing tariffs on Chinese imports to battle inflation. US Commerce Secretary Gina Raimondo, said:

‘President Joe Biden has asked his team to look at the option of lifting some tariffs on China that were put into place by former President Donald Trump, to combat the current high inflation.’

GBP/USD Exchange Rate Forecast: Vote of No Confidence to Shake the Pound?

Looking ahead, with little data to go on for the rest of the day, the Pound US Dollar exchange rate could be influenced by the outcome of a confidence vote in Boris Johnson’s leadership later today.

If the vote of no confidence succeeds, a change in government could provide further volatility in the market, potentially denting sterling. But with an expected win, the cooling of political uncertainty will benefit the Pound.

Meanwhile, the US Dollar could see moderate movement with the balance of trade data released tomorrow. If forecasts are to be accurate, a shrink in the trade deficit from record highs could lend support to the ‘greenback’ before the major release of the CPI later this week.
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