The pound collapsed on Friday as markets were rattled by the contents of UK Chancellor Kwasi Kwarteng’s mini-budget.
However, the very start of the session saw Sterling sentiment driven by the publication of the Bank of England’s (BoE) Financial Stability Report, with GBP weakening as the bank warned about significant headwinds facing the UK economy.
The political uncertainty was then kicked off by the resignation of Chancellor Rishi Sunak and Health secretary Sajid Javid late on Tuesday.
This triggered a flurry of government resignations which ultimately forced Johnson to resign on Thursday.
Johnson’s exit was met by relief by GBP investors as it brought an end to weeks of uncertainty over the future of his premiership.
A hawkish speech from BoE policymaker Catherine Mann also buoyed Sterling sentiment in the latter half of the week as she urged the central bank to be more aggressive in raising interest rates to prevent inflation from becoming embedded.
Looking ahead, we may see the relief over Johnson’s resignation quickly fade as the race to replace him creates fresh political uncertainty.
GBP investors are likely to be particularly concerned by the prospect of a prolonged leadership battle or that the UK’s next PM may be more antagonistic towards the EU.
On the data front the focus will be on the UK’s latest GDP figures. These could see the pound stumble as growth is forecast to have stalled in May.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)