Strike as Britain’s smallest incumbent Prime Minister heads for the exit

The pound rose against both the euro and the dollar, while UK government bonds rose as Liz Truss announced she was stepping down as UK Prime Minister.

While initial market reaction to the resignation was positive, news that the election of a new Conservative Party leader could take up to a week seems to cast significant doubt on the direction of UK policy.

Sterling had strengthened tentatively against the dollar prior to Ms Truss’ formal announcement amid reports of her resignation, and was strengthened further when it was official.

The pound ended the day up about 0.74 percent against the dollar at $1.13060 and up 0.17 percent against the euro at about 86.970 pence.

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Prime Minister with the shortest term in office. Infographic PA graphics

MPs from the ruling Conservative Party will hold a new leadership election next week, leaving no clarity for the time being on who will take over as Prime Minister, although contrary to the votes produced by Mrs Truss and earlier Boris Johnson, may not be open to regular party members if only one candidate comes up.

“Political intrigue will dominate price action until the dust settles, but we expect fundamentals to reassert themselves once that happens,” said Stephen Gallo, head of European FX strategy at the Bank of Montreal. “The overall appreciation potential of the pound is still very limited in our view.”

Mrs Truss’ brief but chaotic tenure has led to a dissolution of discipline within the ruling party and an even greater erosion of the UK’s standing in financial markets, with the pound and the government’s borrowing costs following Mrs Truss’ first election as Chancellor of the Exchequer , Kwasi Kwarteng, announced plans for a massive, debt-financed tax cut budget. However, his dismissal and subsequent rollback of those plans were not enough to save the prime minister.

The appointment of the more centrist Jeremy Hunt as chancellor and his reversal of Mrs Truss’s political platform have helped stabilize markets and support the pound.

Markets are no longer expecting an aggressive full percentage point rate hike by the Bank of England in November, which had been forecast to offset inflationary tax cuts.

https://www.independent.ie/business/pound-up-as-uks-shortest-reigning-prime-minister-heads-for-the-exit-42082276.html Strike as Britain’s smallest incumbent Prime Minister heads for the exit

Fry Electronics Team

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