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Stock exchange in London: Markets acknowledge Truss' resignation with price increases
Photo: Kirsty O'connor/ dpa
British Prime Minister Liz Truss's resignation announcement is a tailwind for sterling.
The currency appreciated about half a percent to $1.1263 on Thursday after previously falling 0.4 percent.
The 30-year UK government bond yield fell nine basis points on the day to 3.895 percent - meaning investors are now viewing bonds as less risk again.
"All in all, the market has not reacted very strongly to today's events so far, but the British stock market is rather positive due to the withdrawal, which underlines the slight price gains," explains Sonja Marten, Head of Foreign Exchange and Monetary Policy Research at DZ Bank.
»Nevertheless, the pound will continue to face volatile times for the time being due to political uncertainty, high inflation and an imminent recession.«
Stuart Cole, chief economist at brokerage firm Equiti Capital, suspects that despite Truss' resignation, responsibility for fiscal and economic policy will remain in the hands of Jeremy Hunt.
"With Treasury Secretary Jeremy Hunt's policies calming UK markets, I don't think anyone seriously expects him to be replaced, regardless of who replaces Truss," the analyst said.
"Government of the UK economy is in relatively safe hands, which protects the pound from the worse effects of political chaos."
mike/Reuters