Forex – Dollar Turns Positive After GBP/USD Slumps as Boris Johnson Quits

© Reuters. – The dollar rebounded from session lows against its rivals Monday, supported by a sharp reversal in sterling after UK Foreign Secretary Boris Johnson resigned from government, raising the risk of a vote of no confidence in Prime Minister Theresa May’s leadership.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.06% to 93.82, after trading as low as 93.44.

came under heavy pressure, falling 0.48% to $1.3222 after Johnson resigned over the prime minister’s Brexit plans.

Johnson’s resignation raises the prospect of a no-confidence vote in May’s leadership, though it’s unlikely that most ministers of Parliament would vote to remove the prime minister, according to JPMorgan.

“At this stage, we don’t see any signs that majority of Conservative MPs are set to turn against May, even if they do not see her as leader of the party for the long run,” JPMorgan said.

Johnson had resigned a day after David Davis quit as UK Brexit Secretary. Davis claimed May’s Brexit plan was “dangerous,” as it gave away too much too easily.

Political uncertainty and a soft Brexit, however, will do little to sway the Bank of England from hiking rates in August amid a recent string of strong UK economic data, AllianceBernstein said.

“The best possible scenario for markets is a soft Brexit delivered by the Conservative party,” which would enable rate increases,” AllianceBernstein said.

Elsewhere, the greenback was also supported by easing trade war fears, pressuring safe-haven currencies such as the yen and Swiss franc lower.

rose 0.33% to Y110.83, while rose 0.22% to 0.9921.

rose 0.21% to C$1.3110 ahead of the Bank of Canada’s interest rate decision slated for Wednesday, when the central bank is widely expected to hike rates by 25 basis points to 1.50%.

rose just 0.01% to $1.1746 despite European Central Bank President Mario Draghi insisting euro-area inflation and growth was sustainable, despite the rising prospect of a global trade war.

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