The British pound is on a charge on Tuesday morning after the confirmation that Theresa May is the new leader of the Conservative Party, and will take over the role of Prime Minister from Wednesday, when incumbent David Cameron will step down from the post.
Markets are reacting positively to the news of May’s appointment as it brings some semblance of stability back to the British political landscape, which in the last three weeks has witnessed a vote to leave the European Union, the resignation of Cameron, a Tory party leadership race, and a challenge against Labour party leader Jeremy Corbyn.
As a result of the relative stability May’s appointment will likely bring, the pound is strongly higher, up by around 1.1% against the dollar at around 8:45 a.m. BST (3:345 a.m. ET) to trade at $1.3133, a one-week high.
Here is how that move looks:
Sterling’s rally on the day extends gains seen on Monday when it first became clear that May would take the premiership. After May’s only other challenger for the Tory leadership, Andrea Leadsom dropped out of the race at 12:15 p.m. BST (7:15 a.m. ET) on Monday, sterling took off.
While sterling has rallied on Tuesday, it is still hugely depressed against virtually all major currencies, following its crash after Britain voted to leave the EU. On the day the referendum’s result was confirmed, sterling fell off a cliff, losing more than 10% in a single session and dropping to lows not seen against the dollar in more than three decades. Sterling closed at around $1.36 on the Friday of the result, so is down around another 4% since then.
In the medium term, it is expected that the pound will likely continue to fall against most major currencies, with predictions of the currency’s bottom ranging from $1.20 at Goldman Sachs, to $1.15 from Deutsche Bank, all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.
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