The Pound begun the week in a strong fashion off the back of news that former Prime Minister Boris Johnson opted to pull out of the Conservative leadership contest.
Britain’s former Chancellor of the Exchequer, Rishi Sunak is now confirmed to step into the role of Prime Minister making him the youngest Prime Minister in around 200 years. Perhaps the uncertainty being lifted as to who would become Prime Minister was behind the boost in the Pounds value yesterday, although since then we have seen the Pound dip with GBP/EUR now trading around 1.1450 and GBP/USD just below the 1.13 handle.
Sunak will inherit a UK economy destined for recession. The economic slowdown coupled with the shock to financial markets following previous Chancellor Kwasi Kwarteng’s budget of tax cuts caused a dramatic sell-off in the Pound’s value roughly 1-month ago.
The reversal of those cuts aided the Pound but it wasn’t enough to keep PM Truss in her role so she stepped down after just 45-days in office making her the shortest-serving Prime Minister in the history of the UK.
The first few weeks of PM Sunak’s tenure could be crucial as we have just witnessed with the downfall of Truss after such as short time in office. How he adapts carries the potential to move currency markets and impact the Pound’s value so if you’re interested in the Pound’s value, UK policies may remain the key driver of the Pound’s value. His financial background could be what GBP needs but time will tell.
GBP/EUR has so far struggled to consolidate above 1.15 despite breaking above it twice in recent weeks following the sell-off late into September. Financial markets are pricing in two 0.75% hikes by the European Central Bank in both November and December, so the chances of any unforeseen bullish moves by the ECB are perhaps slim which could leave room for GBP strength relating to GBP/EUR, if Sunak has a positive start to his new role.
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