The resignation of Liz Truss as British Prime Minister after just 44 days in office was the latest in a series of cruel verdicts from the City of London.
The pound rallied and government bond prices surged as investors hoped a period of political calm and relative fiscal prudence would follow.
“Although Truss was ushered into an era of growth and ‘economic fallout’, his aggressive pro-growth policies were mistimed, sending UK bond markets into a sharp selloff as his policies fanned the flames. from soaring inflation,” said Giles Coghlan, chief market analyst at brokerage HYCM.
“With all that in mind, Truss’s departure should be slightly positive for the pound, depending on his successor as Prime Minister. Already, the UK gilt market was supported as rumors of the prime minister’s resignation emerged this morning, which is a good sign for the stability of the pound,” Coghlan added.
Betfair bookmakers have made former Chancellor of the Exchequer Rishi Sunak the favorite to become the next leader of the Conservative Party, and therefore the new resident of Number 10 Downing Street.
And the new finance minister, Jeremy Hunt, is expected to stay in place. His appointment and the subsequent abandonment of tax cut proposals that had sparked turmoil in financial markets were well received by the market.
Markets.com’s Neil Wilson said a Sunak/Hunt combination would be viewed positively by investors, potentially helping the government see its end and offering what he called “fiscal restraint” in the interim.
British assets were bullish after Truss left. GBPUSD,
immediately gained 0.7% to $1.1308 and benchmark 10-year gilt yields TMBMKGB-10Y,
fell 12 basis points to 3.75%. At the height of the market turmoil after the ill-fated mini-budget, the pound fell to $1.04 and yields soared above 4.5%.
However, the pound and gilts pared gains as investors noted that greater fiscal prudence could hurt economic growth prospects while allowing the Bank of England to tighten monetary policy further as it seeks mitigate inflation, which is currently at a 40-year high of 10.1. %.
The most cautious reaction showed that “it will be a considerable time before the risk premium attached to UK assets fades, following the financial crisis that followed the mini-budget”, said Susannah Streeter , senior investment and market analyst at Hargreaves Lansdown.
“With the third Prime Minister in a year expected to be announced by the end of the month, the UK will continue to be seen in financial markets as politically unstable. What investors are looking for is more stability and reliability, but until they know who will support and lead an economic recovery, that stability still remains very elusive, which means that neither the pound sterling nor equities are likely to make great strides,” he said. added Streeter.
The FTSE 100 UKX stock market index,
changed little at 6920.
The resignation of Liz Truss as British Prime Minister after just 44 days in office was the latest in a series of cruel verdicts from the City of London.
The pound rallied and government bond prices surged as investors hoped a period of political calm and relative fiscal prudence would follow.
“Although Truss was ushered into an era of growth and ‘economic fallout’, his aggressive pro-growth policies were mistimed, sending UK bond markets into a sharp selloff as his policies fanned the flames. from soaring inflation,” said Giles Coghlan, chief market analyst at brokerage HYCM.
“With all that in mind, Truss’s departure should be slightly positive for the pound, depending on his successor as Prime Minister. Already, the UK gilt market was supported as rumors of the prime minister’s resignation emerged this morning, which is a good sign for the stability of the pound,” Coghlan added.
Betfair bookmakers have made former Chancellor of the Exchequer Rishi Sunak the favorite to become the next leader of the Conservative Party, and therefore the new resident of Number 10 Downing Street.
And the new finance minister, Jeremy Hunt, is expected to stay in place. His appointment and the subsequent abandonment of tax cut proposals that had sparked turmoil in financial markets were well received by the market.
Markets.com’s Neil Wilson said a Sunak/Hunt combination would be viewed positively by investors, potentially helping the government see its end and offering what he called “fiscal restraint” in the interim.
British assets were bullish after Truss left. GBPUSD,
immediately gained 0.7% to $1.1308 and benchmark 10-year gilt yields TMBMKGB-10Y,
fell 12 basis points to 3.75%. At the height of the market turmoil after the ill-fated mini-budget, the pound fell to $1.04 and yields soared above 4.5%.
However, the pound and gilts pared gains as investors noted that greater fiscal prudence could hurt economic growth prospects while allowing the Bank of England to tighten monetary policy further as it seeks mitigate inflation, which is currently at a 40-year high of 10.1. %.
The most cautious reaction showed that “it will be a considerable time before the risk premium attached to UK assets fades, following the financial crisis that followed the mini-budget”, said Susannah Streeter , senior investment and market analyst at Hargreaves Lansdown.
“With the third Prime Minister in a year expected to be announced by the end of the month, the UK will continue to be seen in financial markets as politically unstable. What investors are looking for is more stability and reliability, but until they know who will support and lead an economic recovery, that stability still remains very elusive, which means that neither the pound sterling nor equities are likely to make great strides,” he said. added Streeter.
The FTSE 100 UKX stock market index,
changed little at 6920.