British pound lifted as Prime Minister Boris Johnson resigns

The British pound lifted against the US dollar heading back towards $1.20 as Prime Minister, Boris Johnson decided to resign.

A market report by asset managers, Hargreaves Lansdown, reveals that policymakers are relieved that there is razor-sharp focus on inflation providing relief in the financial markets.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “With the mood music changing so abruptly in Westminster and Boris Johnson finally deciding to leave 10 Downing Street, the pound lifted against the dollar, heading back up to $1.20 before dipping back slightly.

“There is a cacophony of problems on the next Prime Minister’s plate, not least the cost-of-living crisis causing voters so much financial pain. Plus the trading relationship with the EU is still fraught with difficulty given the bill to amend the Northern Ireland protocol.

“Mooted tax cuts by the new chancellor may be popular with the electorate but risk making the Bank of England’s task of trying to bring down demand and inflation by raising rates even trickier.

“The FTSE 100 has stayed firmly in positive territory since the announcement, helped by the still weaker pound. Investors are welcoming the laser-sharp focus being trained on inflation, and there are ripples of relief in financial markets that the red hot prices look set to be brought down.

“Policymakers at the US Central Bank, the Fed have shown they are not going soft on inflation and are committed to interest rate hikes of between 0.5 and 0.75 per cent, according to the latest minutes of meeting.

“Runaway inflation is still viewed as the demon threatening economic stability around the world, and although sharp slowdowns and recessions could be a consequence, the attitude that it’s better to go in hard and fast now to prevent a further price spiral is largely being welcomed. The Bank of England is taking a similar stance with higher interest rates firmly on the table, despite the fragile state of the economy.

“Although oil prices have moved down the dial this week, the relief could be short lived, given the outlook of higher energy prices posted by Shell. Cash has been pouring into the coffers of the oil giants and it means Shell has reversed up to $4.5bn in write downs of its oil and gas assets, a step it took after counting the cost of pulling out of Russia.