GBP boosted by the optimism of the new Prime Minister

 

EUR/GBP update: As the pound makes a comeback, bullish sentiment begins to wane. On Thursday, ECB. The challenges facing the next prime minister include inflation, oil prices, and a slowing economy. GBP/USD recovers from the trough due to fresh PM optimism.

A HUGE UNDERTAKING PASSES TO THE NEW PRIME MINISTER

The pound has recovered from its lows thanks to a number of recent events, but it’s hard to support the notion of a long-term positive trend.

The nomination of Liz Truss as the head of the conservative party, who will formally take office as the next prime minister of the UK later today, seems to have the support of the markets. With virtually little positive news on the horizon, the pound has managed to hold its own against what has been an extraordinarily extended stretch of sterling falls.

With tax breaks mentioned as one of the strategies to ease the present cost of living issue, Truss launched a campaign that made bold pledges to help people during this period of skyrocketing inflation. Tax cuts may seem appealing in the short run, but they might have negative long-term effects, such as high prices that persist because more people have discretionary cash. The UK has likewise seen its debt-to-GDP ratio increase as a consequence of pandemic-related stimulus, from 80% before to the epidemic to over 100%.

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