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Lower yields on the UK government bonds and stronger sterling


Updated on the 24th October 2022,

Hope you had a nice weekend – short news this morning, but big news. After Boris Johnson quit the contest last Sunday, Rishi Sunak (former Chancellor) now appears as a considerable favourite to become Britain’s new prime minister. The market reacted well to the news: both 2-year and 30-year UK government bonds are lower at, 3.519% and 3.891% respectively. In addition, the sterling rose 0.3% against the dollar to reach $1.1336 and advanced 0.6% against the euro to 1.525€. ​​

Updated on the 24th October 2022, Source: Yahoo Finance

The market’s reaction suggests that the market considers as good news the fact that Boris Johnson will not win another nomination. According to U. Leuchtmann, head of currency research at Commerzbank, Johnson’s exit removed one of the political risks that had been hanging over the UK currency – B. Johnson’s return could have prompted a flare up in tensions with Europe over post-Brexit argument. Overall, R. Sunak’s agenda is perceived as one that represents lower fiscal risk and that would put less pressure on the Bank of England to hike aggressively.


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