After several weeks of Rishi Sunak’s appointment as the new Prime Minister, it is obvious that he has claimed quite the public support.
Sunak has paved the ideal path from being a finance chancellor to the new prime minister. But ideally coming in after a scandalous exit for Boris Johnson and an even more shocking exit by Liz truss after 49 days. What’s really spurring markets is the current strength of the British Pound and slightly improved figures after Sunak’s takeover despite recession woes.
Statistically the UK’s Final manufacturing PMI rose to 46.2 above expectations of 45.7, Flash services PMI for the month of November rose to 48.8 from 47.5 in the previous month. Whilst there’s other business activities that have marginally fallen such a new orders, the FTSE 100, saw two weeks of gains hitting the highest levels in more than two months. In addition to business expectations rebounding from a 30-month low seen in October.
The GBP/USD pair has taken multiple aggressive hits throughout the year, initially from the dollar’s strength to the downfall of the UK economy, also severely affected by the energy crisis due to the unforeseen Russia, Ukraine war, a cost-of-living crisis, renewed Brexit turmoil, an emergency central bank intervention. In addition to the G7 meetings concluding a negative outlook for the UK amongst the 7 industrialized countries. Forecasting a contraction of the UK by 0.4% in 2023 and growth to 0.2% in 2024, impacted by conservative policies.
After hitting a shocking all-time low near the 1.03 level, shortly after Liz Truss and her administration announced a 43 billion pounds, mini budget that caused a spike in UK borrowing costs. The Pound is found trading in a familiar range between the 1.18 and 1.21 range with the relative strength indicator above the 50-midline indicating a bullish bias, backed by restored hopes for the UK economy from what ought to be a good start. Particularly after Sunak announced the fiscal policy budget that was worth $55 billion, evenly split of spending cuts and tax raises and reassured the public that there would be enough support for the most vulnerable.
Despite the capacity of the UK’s recession and increasing inflation which rose to a 41-year high to 11.1%. There seems to be enough trust on the pound being at elevated levels in the UK’s worst conditions in comparison to the Euro which broke below parity. The Euro continues to trade in a tight range between 1.02 and 1.04 handle after having a good week on the back of the greenbacks plunge in recent days after the U.S. central bank signaled that they will now shift to a less aggressive policy stance to curb inflation.
Britain now awaits, how Rishi Sunak will lead the conservative party with the many issues the UK economy faces including the backlashes opposing conservatives, but with more hope now that financial conditions have stabilized, and with promises that government will fix the current wary conditions to make the UK’s fiscal position in a more sustainable trajectory. The sterling has indeed proved the warm welcome to the 57th Prime Minister of the UK.
