In the next few days, the markets are expected to reflect anxieties over whether the incoming tenant of Number 10 will wish to reverse course again following the recent mini-budget U-turns.
The market has responded positively to the departure of Liz Truss after only 44 days in office, as a result of the strong opposition to her economic plan and humiliating retreat.
The announcement that the prime minister will make a statement from Downing Street spurred a rise for the pound against the dollar, with the pound reaching around $1.13 at one point during the day.
It remained a half-cent higher after the confirmation that she would be leaving office.
Initially, the FTSE 100 also rose, while government borrowing costs declined.
The yield on 30-year gilts fell back to 3.8%, continuing its recovery since the post-mini-budget highs of about 5% that prompted intervention by the Bank of England. As the afternoon progressed, the percentage increased to Thursday morning’s 3.9%.
After a series of U-turns on the tax-cutting growth plan, which was requested by new Chancellor Jeremy Hunt following the dismissal of Kwasi Kwarteng, market damage began to subside.
Ms. Truss’s resignation was met with a measure of relief, given she was the architect of the Growth Plan, which she unveiled during her campaign for the Tory leadership.
Despite this, there was a degree of doubt regarding values, given the lack of clarity regarding who would succeed the prime minister at Number 10.
It will not be Mr. Hunt, since he has ruled himself out, leaving him free to continue preparations for the government’s new medium-term fiscal plan announcement on Halloween.
There will be apprehension as to whether its path will be altered or perhaps postponed to allow the incoming Tory leader to establish themselves.
There is no indication that the statement would be delayed, as the replacement is expected to be in place by October 31.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, stated the following regarding the market movements: “Sterling is highly sensitive to economic policy uncertainty, and even though the ship Britannia will remain largely rudderless with a successor still to be chosen, the future is marginally brighter for investors without her at the helm.
Ten-year gilt yields fell further today as rumors about her resignation increased, a sign of tacit support from bond vigilantes who punished the United Kingdom by abandoning its government’s debt as concerns about fiscal responsibility accelerated.
The business community hoped for a more stable future.
Tony Danker, the CBI’s director-general, stated: “The politics of recent weeks have eroded the confidence of the British people, businesses, markets, and foreign investors.
“This must halt immediately to prevent more harm to households and businesses.
“Stability is crucial. The future prime minister will need to act immediately to rebuild confidence.
“They will need to present a viable fiscal strategy for the medium term and a plan for the long-term growth of our economy as soon as possible.”
