The pound rallies after Liz Truss resigns as prime minister
20th October 2022 14:04
by Victoria Scholar from interactive investor
Liz Truss has resigned as leader of the Conservative Party after 45 days in office.
2022 will see at least four chancellors and three prime ministers as political chaos grips Westminster and destroys the Conservative Party’s popularity in the polls.
Liz Truss has resigned as leader of the Conservative Party after a humiliatingly short 45-day stint in office, prompting a leadership election among Tory MPs within a week. After an embarrassing series of blunders on the economy, she has become the shortest serving prime minister in British history.
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Her downfall comes after the departure of two of her most senior ministers; former chancellor Kwasi Kwarteng was sacked after his disastrous mini-budget sparked chaos across financial markets and her home secretary Suella Braverman suddenly and unexpectedly resigned yesterday. The sequence of events over the last six weeks has created serious damage to the Tory Party, particularly to its long-held reputation for economic competence. Although chancellor Jeremy Hunt has managed to reinstate some economic credibility, there is still a long way to go before political credibility is restored. Â
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The pound is trading higher, attempting to climb back up its two-week highs logged earlier this week as investors cheer Truss’ departure and the potential for a more economically savvy, market-friendly leader. Sterling’s strength is weighing on the FTSE 100 with its major UK exporter stocks such as Diageo (LSE:DGE) and Coca-Cola HBC AG (LSE:CCH) languishing near the bottom of the UK index.
There is still plenty of caution towards the UK as an investment destination given the ongoing political uncertainty, the growing risk of recession and Britain’s persistent inflation problem with price levels hovering at 40-year highs.
Focus among investors now shifts to the leadership election, the chancellor’s medium-term fiscal plan on 31 October and the Bank of England’s rate decision in early November.
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