Will Boris Johnson’s Resignation Affect The UK’s Currency ‘Pound’?

Last Updated on: 7th July 2023, 02:01 am

Will Boris Johnson’s Resignation Affect The UK’s Currency ‘Pound’?

British Prime Minister Boris Johnson is expected to step down as leader of the Conservative Party but will remain, PM until a successor is named. Will this affect the UK economy?

As the Chancellor of the Exchequer and Health Secretary announced their resignations, the pound fell against the dollar.

Dermot O’Leary, Goodbody’s chief economist, said that under normal economic circumstances, the political shenanigans of the past 24 hours would not have much of an impact as households and businesses would just move on.

“But of course, these are not normal economic times, and the UK Government is expected to make important decisions over the next three to four months and this political uncertainty could affect them.”

Describes the tax measures that need to be put in place to deal with the UK real income squeeze; the Northern Ireland Protocol and energy security issues for the UK economy this winter.

“The bottom line is that it takes a stable government to put policies in place for these, so it’s more relevant than the market moves over the last few days,” Mr. O’Leary said.

On the other hand, the Central Bank of Ireland has warned that inflation could peak at over 10% in the coming months but is likely to decline thereafter.

The US Federal Reserve is adopting a more dovish stance, signaling concerns that inflation could become a mainstay. O’Leary said the central bank has lowered its growth forecast, albeit very modestly, and still forecasts modified domestic demand growth of more than 4% in 2023.

“We would take a more pessimistic view, mainly because we would be more pessimistic about the fall in Irish consumers’ real incomes due to inflation,” he said.

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“It’s a global problem,” he said.

“I think we could potentially see some downside risks in this central bank forecast. We are beginning to see signs of a slowdown because of what the Federal Reserve is doing by raising interest rates to slow its economy,” the economist added.

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