Liz Truss Announced as UK’s Next Prime Minister; Causing Market Sentiments to Favor the Sterling.

Liz Truss

Today saw Liz Truss announced as the next UK Prime Minister with 57% of party votes. She will become the third PM in six years. Although she was announced today, in terms of proceedings, Liz Truss will officially become Prime Minister tomorrow, Tuesday, September 6th, 2022, providing a speech Tuesday afternoon.

This development promoted favorable market sentiments toward the Pound Sterling as it is believed that the UK will now be out of the fiscal policy vacuum. These past few weeks have seen the UK government bonds and the GBP selling off aggressively, which is similar to how an EM currency would trade.

In addition, the UK press reports noted over the weekend that Liz Truss is considering freezing energy bills. Allies advise citizens and onlookers to expect a shocking moment to combat the cost of living crisis.

On a different channel, Liz Truss clarified her stance on the Bank of England, restating the importance of their independence and recanting some of her tough rhetoric around Bank of England reforms.

The fiscal policy measures are currently closing in, and the period of GBP weakness has peaked. Consequently, while GBP sentiment is through the floor, there is perhaps a case for a mean reversion in GBP crosses, particularly against the Euro as opposed to the USD, as it is difficult to bet against the greenback. Last week saw the largest weekly rise in EUR/GBP since May.

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