Sterling strengthened and British shares rose on news that Prime Minister Boris Johnson plans to resign.
Investors said the news could come as a relief to UK assets, which have been hit by high inflation, a weak economy and political uncertainty.
Sterling rose as much as 0.6% to $1.1994. The FTSE 250 index, which tracks UK mid-cap shares, was up 0.9%.
“Currency markets will be hoping that any new leader will try to restore party unity and allow the Tories to govern more effectively at a time when the rising cost of living casts a long shadow over the economy,” said Valentin Marinov , head of G10 currency research at Credit Agricole.
Other strategists said the pound’s moves could only be temporary.
“The pound’s rally on the news of Johnson’s resignation is just curious,” said Jordan Rochester, currency strategist at Nomura, noting that it was unclear the next leader would provide a fiscal boost to the economy.
“But a couple of people have told me they think it’s a reason to buy sterling, so it’s clearly a sentiment-led move.”
Source: Capital
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