What will be the situation for Rishi Sunak and GBP after the former Minister of the Treasury is elected as the new Prime Minister? GBPUSD has been up 2.4% this week, but the London Stock Exchange traders are more cautious in reacting to Rishi Sunak becoming the third British prime minister in just three months. How will markets react to the most recent political change in 10 Downing Street?
Rishi Sunak and GBP. Are Bad Times for GBP Over?
Lizz Truss’s tenure as prime minister ended after just 45 days. This short period was full of political and economic turmoil. Bank of England was forced to intervene in the financial markets after GBPUSD fell to historic lows.
Now Rishi Sunak, Truss’s main rival in the race to the most important job in the UK after the ousting of Boris Johnson, is taking over. Will he bring so much expected stability to British politics?
FTSE100 Drifting Sideways
However, the bullish run on stocks didn’t last long. FTSE100 opened at 7018 and closed just six points higher at 7024. On Tuesday, October 26, the bears returned as companies like British Petroleum (-0.98), Ocado Group (-2.66%), Lloyds Banking Group (-1.05%), and Barclays (-0.92%) dragged the London Stock Exchange down. FTSE100 lost 0.8% and is trading below 7000 again.
Analysts from the major investment banks underline that they see Rishi Sunak’s tenure as a positive signal for the UK markets, considering his political and economic skills and the prospect of stability. However, the most critical problems for the British markets remain unsolved.
Things Rishi Sunak Brings to the Table
In his inaugural speech, the new British prime minister underlined the need for economic stability and confidence and announced that “difficult decisions” are ahead. Sunak also declared that he would back tighter fiscal and monetary policy, which is quite the opposite of the Trusses tax-cutting program, which was so hurtful for the pound sterling.
In the nearest term, a lot will depend on the interest decisions from the Bank of England. Investment banks’ analysts expect it will be cautious not to stifle economic growth in the short term. That’s why the expectations for the next week are 75 basis points rather than the full 100 basis points increase.
So far, SimpleFX traders who kept an eye on British politics profited with GBPUSD trades. The pound sterling went up from $1.13 to $1.16 in the last few days and has established itself inside a bullish channel suggesting a trend reversal may have started on September 28. Make sure you trade GBPUSD in the next few days.