By Matthew Boyle
As investors welcome the appointment of Rishi Sunak as Prime Minister, the Pound has surged, rising around 2% against both the Dollar and Euro and hitting the highest levels since mid-September. Financial markets view Sunak, ex-chancellor and former hedge fund manager as a much safer pair of hands for the economy. The surge for Sterling was boosted as data showed government borrowing costs have fallen back combined with a weak Dollar as both US house price growth and consumer confidence have seen a decline. Only last month, sterling fell to a record low against the greenback, with Government borrowing rising sharply in the aftermath of the then Chancellor Kwasi Kwarteng’s failed mini budget. New Chancellor Jeremy Hunt, who will keep his job under Sunak, has already reversed all of Truss’s tax cuts and is scheduled to set out his own economic plan on 31st October.
Whilst Government borrowing has decreased and the Pound is currently flying high, there is no doubt Sunak and Hunt have a tough time ahead as they attempt to steer the country away from the rocks. Mortgage rates hit a 14 year high following recent turmoil and of course the cost-of-living crisis must be tackled, particularly given fuel costs and as we head towards colder months.
After the UK boasted the lowest unemployment figure in 20 years last month, businesses who will be fighting to keep their lights on with these soaring costs might be forced to cut staff to balance the books and as such unemployment may well rise which would put downward pressure on GBP rates.
It is certainly a mammoth task for Sunak and Hunt face particularly given that the Tory party seems in ruin. We must therefore ask… how long will Sunak be able to stave off a General Election? And will Hunt’s plan be able to save the UK from going under or will it be another Kami-Kwasi mission? With so much at risk and rates at these current highs speak to your consultant today if you would like to take advantage.