Sterling soars as Rishi Sunak replaces Sajid Javid as UK chancellor
The appointment of Rishi Sunak has increased the pound exchange rate to the highest levels since mid-December as expectations for increased government spending rises.
Sterling reached 1.3046 against the dollar, a healthy rise when compared to the previous close’s rate of 1.2976, achieving a one-week high.
The pound shot up to record its highest level against the euro since 16 December as it hit 1.2009 amid the Conservative Party‘s surprising shift.
Usually, this kind of change at 11 Downing Street would be expected to disturb financial markets – especially as Javid was due to deliver his first budget next month – however, it has had the opposite effect. The surge in the value of the pound came as analysts expressed their belief that Sunak would increase public spending and cut taxes.
An influx of investors piled into sterling in the hope that Rishi Sunak, previous chief secretary to the Treasury and ally on Number 10, will deliver a more radical budget to kick-start the economy.
Paul Dales, chief UK economist at Capital Economics, said: “The unexpected resignation of Sajid Javid and the promotion of Rishi Sunak could mean that fiscal policy will provide an even bigger boost to GDP growth over the next few years than we already expected.
“The move seems designed to allow the Government to push through even bigger increases in public investment and perhaps resuscitate tax cuts that previously looked dead in the water.”
The British pound has advanced against the euro for six months in a row now.