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GBP the big beneficiary of the Truss resignation


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In the wake of what the markets believed was coming, with the resignation of Liz Truss as UK Prime Minster, pretty much all major risk assets are up.

IGTV’s Jeremy Naylor looks at the rise in the FTSE 100 and the broader FTSE 250, but also at GBP/USD and GBP/EUR, where the biggest reaction has been seen.

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FTSE 100 and Pound Sterling dip but then rally on Liz Truss resignation

FTSE 100, GBP/USD and EUR/GBP reaction to Liz Truss resignation.

PoundSource: Bloomberg
 
 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Thursday 20 October 2022 

Liz Truss resignation

Liz Truss, the British prime minister, resigned at 1.30pm British summer time (BST) after just 45 days in office, making her the shortest-serving prime minister in the UK, following the quasi-total evaporation of her political authority after she lost two key ministers in quick succession.

Following last week’s sacking and replacement of the then Chancellor of the Exchequer, Kwasi Kwarteng, this week’s resignation by the Home Secretary, Suella Braverman, for breaching the ministerial code, made Liz Truss’ position untenable.

The 1922 Committee chair Sir Graham Brady, announced that a new leader will be in place by 28 October, just before the scheduled fiscal statement by the new Chancellor of the exchequer, Jeremy Hunt, and that he expects Tory members to be involved in choosing a new party leader while the opposition calls for a general election.

By the end of October, the UK will thus have had its fifth Tory prime minister in six years

Financial market impact of prime minister’s resignation

FTSE 100 initially drops 0.5% but then rallies on Liz Truss resignation

 

The FTSE 100 gave back all of its Thursday morning gains by dropping 0.5% on Liz Truss’ resignation before regaining all of its losses within a couple of hours.

1 minute FTSE 100 chartSource: ProRealTime

 

The index slid back towards the 6,900 mark, to levels traded on Wednesday, but found support along its breached September-to-October downtrend line which, because of inverse polarity, acted as a support line from where it then rallied.

daily FTSE 100 chartSource: ProRealTime

 

Below it, support can be spotted at the 6,783 early October low. While it underpins, the recent advance may well continue with minor resistance at the psychological 7,000 mark remaining in focus. A rise above Tuesday’s high at 7,018 would target the early September low and the early October high at 7,104 to 7,131.

GBP/USD probes and then bounces off technical support on UK prime minister resignation

GBP/USD slid back from its near $1.13 Thursday morning high to around the $1.1250 zone, or by close to half a percent, on Liz Truss’ resignation and thus revisited its September-to-October uptrend line before bouncing off it and recovering strongly.

1 minute GBP/USD chartSource: ProRealTime

 

Only a fall through Thursday’s intraday low at $1.1172 may lead to the minor psychological $1.10 mark being revisited. Below it last week’s low at $1.0924 can be found. If also fallen through, the 27 September high at $1.0838 would be targeted.

daily GBP/USD chartSource: ProRealTime

 

Resistance remains to be seen along the August-to-October downtrend line at $1.1388 and at this week’s high at $1.1439 as well as at the early October peak at $1.1495.

EUR/GBP hardly affected by UK prime minister resignation

EUR/GBP had already been sliding from its Thursday intraday high at £0.8557 before the UK prime minister, Liz Truss, resigned, and simply continued on its downward trajectory.

The early October low and 55-day simple moving average (SMA) at £0.8649 to £0.8644 are thus back in focus with further support being seen at the early September trough at £0.8567.

daily EUR/GBP chartSource: ProRealTime
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