Pound strengthens as new prime minister takes over with Brexit vow
London — The British pound firmed on Wednesday after two days of losses to touch three-week highs versus the euro but options markets signalled pain ahead, betting on a greater risk of a no-deal Brexit under Britain's new leader Boris Johnson as economic stress worsens.
Johnson took office as prime minister vowing to implement the result of the 2016 Brexit referendum and lead Britain out of the EU on October 31 with “no ifs or buts”.
That could pitch the country into a showdown with the EU and trigger a constitutional crisis at home, as many MPs have pledged to bring down any government that tries to force a no-deal Brexit.
UK economic data has also been dismal in recent months, with a recession seen as likely. But the pound strengthened as much as half a percent on Wednesday against the dollar and rose to a three-week high versus the euro as traders cut some extreme short bets against the British currency.
Johnson took over as Britain’s new prime minister on Wednesday vowing to prove the “gloomsters” wrong and get a new deal to leave the EU on October 31 — or exit without one.
The 55-year-old former London mayor is a divisive figure, loved by many for his wit and optimism but criticised for populist rhetoric and exaggerated claims during the 2016 Brexit referendum vote.
In a speech in Downing Street he repeated that he would prepare to leave the bloc without an agreement with Brussels but suggested this was a “remote possibility”.
But ending Britain’s 46-year membership of the bloc will prove a huge challenge for Johnson, who has a wafer-thin working majority in parliament and faces opposition among his own Conservative Party.
The EU has repeatedly said it will not renegotiate the divorce deal it struck with his predecessor Theresa May, which has been rejected by MPs three times.
In typically upbeat fashion, Johnson insisted he could find a way through and unite the country.
“We are going to fulfil the repeated promises of parliament to the people and come out of the EU on October 31, no ifs or buts,” he declared.
Watched by his girlfriend Carrie Symonds, the former London mayor said “the doubters, the doomsters, the gloomsters are going to get it wrong again”.
But he added: “It is of course vital at the same time that we prepare for the remote possibility that Brussels refuses any further to negotiate and we are forced to come out with no-deal.”
European Council president Donald Tusk was quick to congratulate Johnson, adding: “I look forward to meeting you to discuss — in detail — our cooperation.”
Johnson was on Tuesday elected leader of the governing Conservative Party by its members, and was confirmed prime minister in a meeting on Wednesday with Queen Elizabeth II.
His ascent is the culmination of a lifelong ambition for the politician who, with his jokes and absurd anecdotes, has enjoyed celebrity status in Britain for decades.
But before he even took office, several pro-European ministers quit in protest at his threat of a “no deal” Brexit, fearing the economic consequences.
Opposition Labour leader Jeremy Corbyn challenged Johnson to call a general election, saying he “has no mandate from the people”.
While Johnson won a landslide in the contest to become Tory leader, a YouGov survey Wednesday found his approval rating was just 31% among the public.
Beloved by many for his apparent refusal to take life too seriously, the former journalist is accused by others of demonising minorities in his articles and incompetence.
His appointment was disrupted by climate protesters, who briefly stopped his convoy heading to Buckingham Palace for his meeting with the queen.
Johnson is expected to swiftly announce his new cabinet, and his first appointment proved predictably contentious.
He named as a top adviser Dominic Cummings, a combative character who helped lead the victorious “Vote Leave” campaign during the 2016 referendum.
A source in Johnson’s campaign team said he would build a diverse cabinet with more women and a record number of ethnic-minority politicians.
Sajid Javid, the son of Pakistani immigrants and May’s interior minister, has been widely tipped to take over as finance minister.
Brexit is the priority for Johnson after May repeatedly failed to get her divorce plan through parliament, forcing her to twice delay Britain’s departure date.
In a short speech before tendering her resignation to the queen, May wished Johnson “every good fortune”.
A heckler shouted “Stop Brexit” as she stood with her husband Philip by her side, to which she retorted: “I think not.”
Brexit aside, the most immediate problem facing Johnson is a stand-off with Iran after Tehran seized a UK-flagged tanker in the Gulf last week.
Johnson is also expected to seek to repair ties with Washington, after a rift caused by the leak of diplomatic cables criticising the White House.
US President Donald Trump was one of the first to congratulate Johnson on his victory saying he would be “great” and describing him as “Britain Trump”.