Sterling showed gains on Thursday as Liz Truss announced her resignation as prime minister. Her economic policy, which divided the Conservative Party and sent shockwaves through the markets barely six weeks after her appointment, was to blame.
The sterling, which had gained before the news, was most recently up 0.35% at $1.1262. It also increased somewhat in value relative to the euro, closing at about 87.08 pence.
In fact, British government bond yields decreased significantly as their prices increased, while shares in London briefly increased.
Of course, within the coming week, a leadership election will be finished.
According to Societe Generale currency strategist Kenneth Broux, “the short timeframes of the leadership elections should minimize damage for the pound. Broux warned that we would not want to be long (sterling) until we knew who took control.
While Truss was speaking, the UK mid cap share index briefly rose 1% and last traded up 0.4%. In contrast, UK blue chips (.FTSE) started to decline.
In addition, the 10-year gilt yield decreased slightly throughout the day to 3.86%.
A day after a second top minister resigned and fighting and bickering broke out among her colleagues in parliament, Truss announced her resignation.
Besides, Truss’s premiership has already seen a collapse in the bond market and a U-turn on practically all of her fiscal policy plans after only six weeks in office. Less than a week after she sacked her finance minister, she fired her interior minister on Wednesday.
Following remarks by Ben Broadbent of the BoE, analysts claimed that aggressive rate rise bets had been scaled back. This had hurt sterling earlier in the session.
According to Broadbent, the BoE is prepared to react to changes in Britain’s tax and spending policies. But, it is uncertain if interest rates would increase as much as investors had anticipated.
Nonetheless, following the remarks, investors significantly reduced their bets on the BoE raising interest rates by a full percentage point the following month.
