Nigel Farage Won’t Fight Conservatives
- British pound gets boost from welcome news
- Boris Johnson likely to be main beneficiary
- Takes some uncertainty off the table
On Monday, Brexit Party leader Nigel Farage stated he would not fight the Tories in the election, which can help tilt the balance of power towards confirmation of a majority for Boris Johnson.
This will be crucial for the Brexit negotiation, because without that majority, the situation in the United Kingdom becomes much murkier than is completely necessary. With that being the case, it looks as if the British pound has been the main beneficiary during trading to kick off the week.
Ultimately, this drives something into the picture that has been desperately missing: a bit of clarity. It suggests there will be a major change in power as far as Parliament is concerned, and that gives traders something to start trading on.
The biggest issue facing the British pound and the British economy in general over the last couple of years has been uncertainty. If we can get rid of it, as traders we’ll have the ability to put money to work.
The referendum
Farage said it was, in fact, a very difficult decision to make, as he doesn’t necessarily align 100% with the thoughts of Boris Johnson. However, the alternative was the likelihood of a second referendum in the United Kingdom.
While that might help with the Remainers, the reality is that nobody likes a constitutional crisis. Plus, the government simply reversing a decision that the public made is not a good look for democracy. With Boris Johnson having a majority, a referendum is extraordinarily unlikely.
Farage also suggested that the Brexit Party was going to focus on a Labour Party seat specifically. If that’s the case, this can only end up helping the Tories, which are more likely to drive the United Kingdom out of the European Union.
With that being the case, it looks as if negotiations with the EU will probably continue along the same lines. The EU has been a bit more conciliatory lately.
Continuation of attitude
It’s very likely that we will see a continuation of the overall market attitude that has been the main focus over the last couple of months. The British pound has been strengthening overall, as traders begin to get comfortable with the idea of Great Britain leaving the European Union, which is starting to slide into a recession.
The financial market should continue in the same direction that they have been, now that Farage has suggested he is not going to do anything to shake up the Tory majority. In the end, he believes that Boris Johnson’s plan of a sharper split from the European Union is probably his best outcome.