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AUD News: There's a new UK PM in town

24th July 2019

Well, the first leg of the next part of the Brexit race is officially underway, with Boris Johnson being confirmed as Theresa May’s replacement as leader of the Conservative Party and Prime Minister of the UK. Not a moment too soon too; finally putting to bed weeks of speculation, leadership debates and seemingly endless uncertainty surrounding who will take the United Kingdom out of the European Union.

The former London mayor beat Foreign Secretary Jeremy Hunt yesterday in the final leadership ballot 92,153 votes to 46,656 — winning 66 percent of the Conservative Party faithful votes. Boris won’t take over office straight away; outgoing Prime Minister Theresa May still has a day left to tidy her things. When she does vacate Number 10 Downing Street, Boris will need to meet with the Queen so he can be invited to form a new government.

Johnson’s victory has been widely tipped by Brexit pundits for some time, with many worried that Jeremy Hunt’s original call to remain in the EU stood at odds with the task the UK now faces.

So, just who is Boris Johnson?

Born in New York City to wealthy upper-middle-class British parents, before he was the biggest thorn in Theresa May’s and other Remainer’s sides, Boris Johnson was the Mayor of London from 2008 to 2016 and before that a political columnist and editor of The Spectator paper.

Historically seen as a bumbling but affable Conservative, Johnson was popular among his peers, and his stints as Spectator editor and Mayor of London made him a household name. This spotlight also resulted in a few hilarious and controversial slips of the tongue that began to become part and parcel of his tenure.

Three of Johnson’s most famous slips of the tongue

Boris Johnson isn’t exactly a man of few words; he likes to add his two bobs into most controversial subjects, leaving many a slip of the tongue in his wake. Where to start? Over the years Boris has suffered from many a case of foot in mouth disease, managing to offend an almost admirable array of interest groups and minorities.

1. Iranian slip-up while Foreign Minister
Nazanin Zaghari-Ratcliffe, a British-Iranian woman imprisoned in Tehran for apparently stoking fires of discontent within Iran has had her situation made all the more difficult by some slips of the tongue by Boris. In 2016, while Johnson was the Foreign Secretary, he stated that Zaghari-Ratcliffe was “teaching people journalism” in Iran, at odds with her mission there. Overzealous Iranian officials cited Johnson’s words as evidence that she had engaged in “propaganda against the regime” and duly kept her imprisoned as a spy and sentenced to five years in prison for attempting to overthrow the Iranian government. Jeremy Hunt this year granted Zaghari-Ratcliffe diplomatic protection in a bid to resolve her case, while Boris hasn’t apologised for his erroneous speech.

2. Comparing women wearing Burqas and Niqabs to letter boxes
In 2018 Boris Johnson was reported to the Equalities and Human Rights Commission after suggesting women wearing niqabs resembled “letterboxes” and “bank robbers” in a column he wrote for The Daily Telegraph.
At the time, Labour MP David Lammy derided Johnson, saying: “Our pound-shop Donald Trump is fanning the flames of Islamophobia to propel his grubby electoral ambitions.”

3. “Bodies” gaffe regarding Libya
The Libyan offensive and moves to remove Muammar Gaddafi as leader of the country left a power vacuum and a number of issues throughout the country. Boris Johnson had some less than exemplary plans for the Libyan coast, suggesting in 2017 that, “There’s a group of UK business people, actually, some wonderful guys who want to invest in Sirte on the coast, near where Gaddafi was captured and executed, as some of you may have seen, they have got a brilliant vision to turn Sirte into the next Dubai, the only thing they have got to do is clear the dead bodies away.” Expectedly after a gaffe so good, there were numerous calls for Johnson’s head and resignation, but there were bigger things in store for Boris.

What does Boris’ election mean for Brexit?

One of the most significant issues weighing on the UK, economy and the GBP has been the uncertainty surrounding Brexit and exactly what form it will take. Johnson’s ascension to the top job puts some of that uncertainty in the rearview mirror while giving us a healthy dose of it now. A few things are likely to happen for Brexit now that Boris is the man in charge. (Need a refresher on what Brexit means for Aussie travellers? We don't blame you).

There will be ministerial appointments and resignations

Now that Boris is officially the man, he will have the opportunity to build his own Brexit dream team in an effort to get the job done before the October 31st deadline. So who will resign, and who will get a promotion?

Education Minister, Anne Milton tweeted her decision to quit just half an hour before the leadership ballot, seeing the writing on the wall and accepting her fate before Boris had a chance to swing the axe. Foreign Office Minister, Sir Alan Duncan also resigned on Monday, saying Mr Johnson in the top job would lead to a “crisis of Government” as the clouds of Brexit gather. Chancellor Philip Hammond also announced his intention to resign on Saturday, citing Boris’ willingness to pursue a no-deal Brexit as the clincher for him. Justice Secretary David Gauke and International Development Secretary Rory Stewart also announced their intentions to resign before Boris sacked them.

Boris’ appointment means that Brexit can start chugging along to the next station, but what does that look like?

What happens next?

From a crowded field of ten, the Conservative Party has polled 160,000 of its members to come to Boris Johnson as the next lucky duck to take the UK to its Brexit crescendo. But what happens next for the Dude in Downing Street?

He’s used to being the key thorn in the side of the Government, now Johnson gets to play the main character as other parties work to undermine and challenge him.

But he is now likely to face resistance on two fronts: from the EU on any attempt at renegotiating former PM May's Withdrawal Agreement; and from opposition parties and rebel Tory MPs to any push for a no-deal Brexit.

European Union chief Brexit negotiator Michel Barnier said his team was looking forward to “working constructively” with Johnson after he becomes prime minister Wednesday. Barnier said the EU was ready to “facilitate the ratification of the Withdrawal Agreement and achieve an orderly Brexit... We are ready also to rework the agreed Declaration on a new partnership in line with [European Council] guidelines.”

Jeremy Corbyn called for a general election and argued Johnson has not “won the support of our country” merely the Conservative Party voters.

One thing is for sure, Brexit is slowly but surely moving closer to its objective.

What does this mean for the AUD/GBP?

The AUD/GBP was quite muted this morning with the AUD dipping just a touch on the news of Johnson’s appointment to the top job. Despite fears of a no-deal Brexit being forced by Boris’ approach, the pound wasn’t particularly perturbed, signalling a couple of things: that the market had foreseen a Johnson victory at the ballot and largely priced it into foreign exchange markets and that only solid policy is going to breathe any life into the GBP or bring on further losses.

Actual movement at the Brexit station could still be months away, and that uncertainty is expected to be a positive for AUD performance against the pound to finish 2019, with many economists forecasting more losses for the GBP against most major currencies. Whether or not Boris appears more likely to deliver a deal or no-deal Brexit is going to weigh the heaviest and any negotiations with the EU, Ireland and Scotland regarding Brexit are going to be closely watched by the market.

Need to buy GBP but worried about the exchange rate moving again? Purchase your GBP within any of our 140+ stores and ask to add Rate Guard*. It's free, and if the rate moves within 14 days, we'll refund the diffrence.

Make sure to follow our AUD News and Brexit updates for the latest news on how Brexit is travelling and how it affects Aussie travellers, the GBP and the AUD. With the RBA and Bank of England also approaching key policy decisions regarding interest rates, the next few months will likely be a continuance of the instability between the AUD/GBP.

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