Home Daily Commentaries Sterling surges on change of chancellor

Sterling surges on change of chancellor

Daily Currency Update

GBP - British PoundIt was another good day for the pound yesterday as it rallied hard on the unexpected resignation of Chancellor of the Exchequer, Sajid Javid. In a long awaited reshuffle of his cabinet, PM Boris Johnson, unexpectedly removed Javid from the top job as it emerged he had been told he could keep the role as long as he sacked his advisory staff in favour of ones favoured by Johnson (and his chief advisor, Dominic Cummings).Javid, stated that he had been forced from the job stating "no self-respecting minister" could abide to such demands. His successor was quickly named as Rishi Sunak, tory MP for Richmond, Yorkshire, who was formally Chief Secretary to the Treasury and seen as a die-hard Johnson loyalist. Cynics will see the move by Cummings as a move to bring financial matters under the control of himself and Johnson, so the PM will have more influence over fiscal policy than was possible with Javid at the helm. This in turn opens the door to the possibility of much looser purse strings from the treasury when it comes to the upcoming budget which could be a driver for UK inflation reducing the need for rate cuts from the Bank of England. As a result of the move GBP/USD rallied from around 1.2950 to top out around 1.3070 before retracing a touch to 1.3050 where it currently trades. The move higher was replicated in GBP/EUR which pushed up from 1.19 to around 1.2050.

Key Movers

The coronavirus continues to dictate market sentiment with global equity markets mixed and the commodity currencies continuing to remain under pressure. Another 121 people fell victim to the virus yesterday with the total number of infections rising to around 64k. USD/JPY remains under 110 not aided by subdued inflation numbers released from the States yesterday which showed monthly CPI missing target at 0.1% for Jan/Feb when 0.2% was eyed. The euro hasn't been helped this morning by German Q4 GDP coming in flat when a small uptick of 0.1% was predicted. The outlook for the first quarter isn't looking great either as the countries dominant manufacturing sector will likely be further hit by a drop in demand from China on the back of the coronavirus, adding to the woes it has felt by the reduction in orders on the back of the China/US trade standoff. Today's main event will be US Retail Sales due at lunchtime with both the core and overall reading due to show a rise of 0.3% m/m. EUR/USD is down to 1.0840.

Expected Ranges

  • GBP/USD: 1.2980 - 1.31 ▲
  • GBP/EUR: 1.1960 - 1.21 ▲
  • GBP/AUD: 1.9350 - 1.95 ▲
  • GBP/NZD: 2.0175 - 2.0330 ▲
  • GBP/CAD: 1.7230 - 1.7375 ▲