Sterling down-Johnson Government-its over
2022.07.06 17:26
The pound bounced, albeit weakly, as beleaguered Prime Minister Boris Johnson clung to power in the wake of a fresh scandal over his stewardship of the Conservative Party.
By 9:50 AM ET, the pound had recovered by nearly a cent from the two-year low it hit earlier to trade at $1.1915, down only 0.4% on the day, as markets zeroed in on the prospect of a more expansive fiscal policy and the lifting of a more immediate threat to the country’s energy supplies and balance of payments.
Earlier, Johnson had survived an intense bout of questioning in the House of Commons both from opposition lawmakers and from his own party’s benches, which focused on his failure to tell the truth about how he promoted a man suspected of sexual harassment to the senior position of Deputy Chief Whip.
Repeating what has become a routine occurrence in the last few months, Johnson rejected calls to step down, pointing to the fact that he still commands a sizeable majority in the House after his 2019 election victory.
However, the sense of paralysis in the government is growing after two senior ministers – Treasury chief Rishi Sunak and Health Minister Sajid Javid – both resigned on Tuesday over his handling of the affair.
Javid repeated his criticisms of what he called Johnson’s lack of integrity and competence in a statement to the House immediately after the end of the weekly Prime Minister’s Questions session.
“The reset button can only work so many times,” Javid said. “You can only turn the machine on and off so many times before you can realize that something is fundamentally wrong.”
Johnson has replaced Sunak with Nadhim Zahawi, who is perceived as being more accommodating than his predecessor. Sunak, in his resignation letter, had mentioned deep differences over policy, hinting that he wanted more progress on reducing the budget deficit.
“Given that the PM and many other Conservative MPs were increasingly frustrated with Mr Sunak’s tight fiscal approach, it seems unlikely that Mr Zahawi will be quite as focused on trying to balance the books,” said HSBC analysts Simon Wells and Chris Hare in a note to clients. They noted that Sunak “referred to the need for ‘sacrifices’ and ‘difficult decisions'” in his resignation letter. “For now, Mr Johnson’s more dovish inclinations appear to have won out.”
