Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Pound at two-year low after two senior UK cabinet ministers quit

Economy Jul 05, 2022 03:36PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

By Joice Alves

LONDON (Reuters) -Sterling slumped against to a two-year low against the dollar on Tuesday as a crisis in British Prime Minister Boris Johnson's government compounded pressure on a currency already reeling from recession fears and a resurgent greenback.

Finance minister Rishi Sunak's resigned minutes after the health minister stepped down saying he had lost confidence in Johnson's ability to govern in the national interest.

The resignations could be the final blow for Johnson's premiership after he had tried to apologise for the latest scandal to dog his almost three years in office.

However, the pound had already been under heavy pressure through the day as a big jump in natural gas prices in both Europe and in Britain looked set to push inflation even higher, potentially thrusting the economy into recession.

Sterling was also among the currencies hammered by a resurgent dollar, which is benefiting from a global safe-haven bid as recession fears mount.

News of the British cabinet resignations triggered a slight move lower but sterling stayed off March 2020 lows of $1.1899 hit earlier. It then recouped some losses and by 1930 GMT was trading 1.25% lower at $1.195.

"The initial gut reaction would sell the currency. However, the UK is evidently not the only economy in a precarious or fragile position," said Philip Shaw, chief economist at Investec.

He argued that, facing a governing crisis, Johnson might even opt for a less confrontational approach towards talks with the European Union over Northern Ireland, "which could lower the perceived threat of a trade war or trade actions."

The British parliament is considering a new law which would unilaterally change customs arrangements between Britain and Northern Ireland that were initially agreed as part of its EU exit deal.

Analysts said Johnson's days in office appeared to be numbered but choosing a new Conservative party leader could take weeks.

"The new leader will want to win over voters and the Tory party - so perhaps down the line we'll see fiscal subsidies for energy and tax cuts to win over the Tory faithful," said Jordan Rochester, an FX strategist at Nomura.

Sterling was up 0.2% against the euro, which plunged to new two-decade lows against the dollar,

But it shed 1.3% to 162 yen, while against the Swiss franc sterling weakened 0.5% to 1.157.

The Bank of England, trying to tackle soaring inflation without dampening the economy, has raised rates five times since December. Some market players expect a bigger increase of 50 basis points at the next meeting on Aug. 4.

The BoE said on Tuesday the economic outlook for Britain and the world had darkened and told banks to ramp up capital buffers to ensure they could weather the storm.

Pound at two-year low after two senior UK cabinet ministers quit

Related Articles

Sudden crypto drop sends bitcoin to three-week low
Sudden crypto drop sends bitcoin to three-week low By Reuters - Aug 19, 2022 8

By Tom Westbrook and Hannah Lang SINGAPORE/WASHINGTON (Reuters) -Cryptocurrencies fell sharply on Friday, with sudden selling dragging bitcoin to a three-week low, with analysts...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email