2m ago
09.06 BST
Susannah Streeter, senior investment and markets
analyst at Hargreaves Lansdown says that with Boris Johnson out of the running,
the threats to UK political stability are waning:
He had
threatened to cause fresh political instability, given that it’s less than two
months since he left the job, so his retreat from the race brought a sigh of
relief for sterling and an even bigger sigh of relief on the bond markets.
The pound
is up by more than 0.6% to $1.136 with former Chancellor Rishi Sunak now
favourite to take the top job.
There is a
growing chance that Penny Mordaunt could also secure the backing of 100 MPs,
the threshold needed to keep her in the running, the outcome of which could
still be decided by party members.
Given her
popularity among grass roots Conservatives we could see a Groundhog Day
scenario emerging where the party faithful elect the candidate less popular
with MPs, which could add to the clamour for an early general election.
Regardless,
she says that with Truss out of office and Johnson out of the running, it’s
been enough to push down UK borrowing costs, referring the drop in UK 10-year
gilt yields to around 3.8% this morning.
It’s an indication that bond vigilantes have
been pacified by the expectations of a calmer political horizon ahead with
fiscal responsibility forecast to be the new mantra of the incoming Prime
Minister.
Whoever
clinches the leadership, faces a daunting task given the looming recession,
volatile energy prices, continued supply chain tangles and labour shortfalls
and a Bank of England determined to raise interest rates in the face of a
shuddering economy to bring rampant inflation under control.
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