Hive Intelligence Report: Sunak and Javid Resigned. Here’s What Our Network Thinks

Our network’s reaction to the resignation of Rishi Sunak and Sajid Javid. Their letters of resignation can be found here and here, respectively. Meanwhile, our podcast with Sajid Javid can be found here where he discussed post-Brexit Britain.

Summary

• Most of our network do not see Boris Johnson lasting as PM. They expect he’ll either be pushed out by the end of the month or he’ll lose an early general election, if called.
• There were mixed interpretations on what this means for Brexit, but our network noted how we could move to a friendlier stance on Europe.
• Our network remains bearish GBP.

What’s Next for the Conservatives and Brexit?

Will Boris Johnson remain as the PM?

• Most in our network think the party will push him out. Some have put the end of the month as their target.
• However, one in our network thinks he won’t go. They think that this will fester on and on and won’t be good for the UK.

Who could take Boris Johnson’s position?

• Little opinion was given on who might be next. But a few thought that Sunak will hide this time – too smart to take on this economy – even with Labour as weak and divided as they are. Mordaunt wasn’t mentioned despite her favourable odds (below), while Wallace and Truss were in discussion.
• Here are the current odds from betfair.

How will Brexit be affected?

• We could end up with Remainers leading all three main political parties trying to create a workable Brexit (i.e., we slowly move back towards Europe). The problem remains a negative terms of trade shocks when there is a global negative terms of trade shocks and you’ve also had a negative labour market shock and negative aggregate supply shock!

Why would you want to move back towards Europe?

• Member One: You could solve the Ireland problem, boost your labour market supply and try to repair some of the damage to your service sector.
• Member Two: I agree on Ireland, but the rest takes too long. Moreover, the labour supply issue, i.e., a problem with immigration, is not necessarily a Tory issue.
• Member One: The Tory’s made it their issue by cutting off the supply of labour we needed. They prioritised the grey vote over the needs of the country.
• Member Three: Not sure if I agree. Thinking that the UK economy would open its arms to immigrant labour seems to ignore that in the first place people voted for Brexit and then voted for the Conservatives.

Markets

Is this positive GBP?

• Probably not. Boris Johnson is a liability. At the same time, this could accelerate a Labour win as it could bring a general election sooner.
• GBP remains a sell amongst our network.

And a Podcast Worth Listening To

• Sunak and Javid resign. Now what? | Coffee House Shots

Ben Ford is a Researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)