Sterling gains on reports PM Johnson to resign

Sterling climbed on Thursday after several media reports that the British Prime Minister would make a statement later and resign.

The gains versus the dollar and the euro were measured, however, as a stream of ministerial resignations this week had made Johnson’s departure extremely likely and largely priced in by markets.

Against the dollar, the pound rose to $1.1994 by 0809 GMT, up 0.6% at the day’s high, from $1.1938 before news broke that he would be resigning. It hit a March 2020 low of $1.1887 on Wednesday.

Versus the euro sterling climbed to 85.14 pence after the media reports, a three-week high.

A spokesperson for Johnson’s Number 10 Downing Street office said he would make a statement to the nation on Thursday.

“If you look at where the value of the pound at these cheaper levels, we would expect it go higher from here. We would expect a rally if some of the uncertainty comes off the table,” said Gerard Fitzpatrick, global head of fixed income at Russell Investments.

Sterling has been floored to two-year lows versus the dollar below $1.18 this week, although analysts say concerns about the health of economies including Britain’s have been far more significant for the weakness than the political drama in Westminister.