The pound fell against the U.S. dollar and the UK’s leading benchmark FTSE dropped amid more uncertainty coming from PM Boris Johnson’s administration.
UK Health Secretary Sajid Javid said in a tweet that he quit Johnson’s government and that he’s lost confidence in the Prime Minister. Meanwhile, the Chancellor of the Exchequer Rishi Sunak also announced his resignation on Tuesday.
The pound registered a decline of 1.4% right after the news, after earlier falling as much as 1.8% to 1.1899, the lowest since March 2020.
Nigel Green, the CEO of deVere, one of the world’s largest independent financial advisory, asset management and fintech organisations, says: “Slowing growth, and other economic factors, are likely to have had more of an impact on the pound.
“But there’s no getting away from the fact, this all creates more much more uncertainty for sterling. “
Global investors were warned in late May to hedge against an ‘existential’ crisis with the pound by Wall Street analysts as the British currency faces issues usually only seen in emerging markets.
Whilst sterling strengthened 0.2% that month, it remains the third-worst performing major currency this year. It has weakened 8% to $1.2468 in 2022.
The CEO doubled down on a previous comment made during Boris Johnson’s previous Confidence Vote, noting that he believes there will be a leadership challenge before the next election.
When names are put into the ring to become the next leader, and policy agendas of the frontrunners are known, “the pound can be expected to become highly volatile – just as it did during the Brexit negotiations,” he explains.
“The issues laid bare by Johnson’s possible successors that will impact the pound would include the UK’s relationship with the EU and single market access, fiscal stimulus and the Northern Ireland protocol, amongst others.”
Nigel Green concludes: “Sterling is falling out of favour currently for a myriad of reasons, including politics.
“In turn, this will favour the dollar, the euro and others.”
Pound nears lowest level since pandemic amid more chaos for Boris Johnson