Alexander Boris Pfeffel Johnson, was appointed as prime minister of the UK on Wednesday the 24th July. It is the culmination of a career that started in journalism and had other highlights, including being mayor of London and one of the lead figures in the political campaign, that proceeded the June 2016 referendum. Controversial and at times divisive, the newly appointed premier is a typical product of the British elites; coming from a privileged background, Boris Johnson studied at Eton and later graduated from Oxford University, with a degree in classic studies. His professional career began in journalism and for 5 years he was the Brussels correspondent for the Daily Telegraph, a top British newspaper. During this period Boris became known for the humorous and exaggerated tone, (sometimes described as dishonest), with which he commented on the day to day life of the European Union. Some say his chronicles have contributed to the growing hostility felt by many in the UK, towards the European project.
Photo by Arthur Osipyan.
However, the support offered to the Leave campaign, in the run-up to the 2016 referendum, was not a spontaneous act. Johnson kept the taboo going for a while, before finally offering his support to the leave side. Several analysts pointed that his decision may have been part of a strategy to further his political career, rather than arising from strong convictions.
So, what sort of Brexit outcome can we then expect with Boris Johnson at the helm? The new British Prime Minister used harsh words during his campaign for the leadership of the conservative party, promising that under his premiership Brexit will happen on October 31st, come what may, do or die. His choice of cabinet ministers, including many hard line Brexiteers, also signals a predisposition for an exit without agreement. This is one of the potential outcomes for the process. However, it would have high political costs; some in the moderate wing of the conservative party have already said that, having no other choice, they would join the labour party in a vote of no-confidence, which could trigger the fall of the government and lead to an early election. In such a scenario, Brexit would probably be postponed. But Boris, besides being controversial, also has a reputation for being pragmatic. It is not at all implausible that, once established in his new role, Johnson will change his discourse and seek an agreement with the EU for a negotiated exit, which would probably require a postponement of the leaving date, beyond October 31st. This scenario, less likely than the previous one, would surely trigger strong opposition from the hardliners within his party and government cabinet, leaving the prime minister, once again, exposed to a vote of no-confidence called by the opposition.
We can therefore say that the most probable scenario is that Brexit will once again be postponed and, possibly, there will be an early election, which could take place before the end of the year. Only a new parliament can break the deadlock; the current composition creates a game of political chess, making it impossible for any of the 2 sides to have a decisive majority.
And how will the markets react? Until a final decision is made and the process concludes, it is unlikely that there will be a significant reaction. The uncertainty we currently experience is already discounted from the value of the Pound. Sterling has fluctuated between a low of $1.1985 and a high of $1.3712, since the June 2016 referendum. Currently the British currency trades at approximately $1.24, well within the mentioned range; only once there is clarity over the outcome of the process, will we see a significant deviation.
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A no deal Brexit is likely to drive the Pound down, to $1.10, potentially even parity with the Dollar. On the other hand, if an agreement is reached, keeping the UK close to the EU, Sterling Is likely to rise, to the region of $1.40 or even above that. But, until then, we should not expect significant shifts from the last 3 years average.
