The British pound is continuing to rally on Wednesday, extending its gains into a fourth consecutive day, the longest rally for the currency in around two months.
Sterling’s rally comes as Britain waits for prime minister David Cameron to step down on Wednesday afternoon, at which point he will be replaced by new Conservative Party leader Theresa May, who won the race for Number 10 after her only remaining rival, Andrea Leadsom, dropped out of the race on Monday.
Markets reacted 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 is set to bring, the pound is marginally higher, up by around 0.15% against the dollar at around 8:30 a.m. BST (3:30 a.m. ET) to trade at $1.3266, the highest level since July 4. Earlier in trading, sterling gained as much as 0.7% against the dollar, but has slipped a little since.
Here is how that move looks:
Sterling’s rally on the day extended gains four a fourth day, although Tuesday’s rally was huge, with the currency gaining around 1.9% against the dollar. The pound also enjoyed its best day against the yen for almost three years, as Japan’s currency weakened following the announcement of further stimulus measures for the country’s economy by prime minister Shinzo Abe. Sterling was more than 3% higher against the yen.
While sterling has rallied for four days, 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.