18.07.201915:26 Forex Analysis & Reviews: GBP/USD: Barnier's statements inspired the pound, but Johnson's victory may result in early general elections

The GBP/USD pair rebounded from the 27-month lows after the words of the chief Brexit negotiator from the European Union Michel Barnier that the alliance is open to discuss the status of the Irish border.

"This should send the pound sterling up if there is a change of tone on the part of the EU, and these comments suggest the potential for more flexibility," Mizuho Bank said.

"The British currency has been under strong pressure since Theresa May announced her decision to leave the post of leader of the Conservative Party. In the eyes of investors, this event increased the likelihood of implementing a "hard" Brexit", – strategists at Morgan Stanley noted.

According to them, this scenario is the worst: if the UK leaves the EU without an agreement, the GBP/USD will fall in the range of 1.00-1.10.

In November last year, the Bank of England admitted that in case of disordered exit of the Foggy Albion from the block, the pound could fall to parity against the US dollar.

Now, the focus is on the next question – who will eventually take the seat of Prime Minister of Great Britain and will ensure the country's exit from the EU until October 31?

Meanwhile, political uncertainty in the United Kingdom threatens to persist longer than one would hope.

Since the most likely scenario is the victory of Boris Johnson in the struggle for the post of head of the Cabinet of Ministers, his talks with Brussels may soon become one of the hottest news topics. However, his actions in the domestic political arena will be no less significant for the British currency, and here, the pound should be expected to have trouble.

According to The Times, B. Johnson's team is working to initiate early general elections in the country, although the politician himself had previously rejected this possibility.

Apparently, the situation in the British Parliament was not the best. Given the statements of B. Johnson on the readiness to withdraw the state from the EU at any cost, a number of deputies will be ready to go against him to prevent the implementation of the "hard" scenario. Therefore, it is in B. Johnson's interest to hold early elections. Recent data from sociological studies suggest that the sooner this is done, the more likely the tories to strengthen their positions. However, this development of events means the further preservation of uncertainty, and the pound in such conditions will be difficult to strengthen its position.