UK politics save the day of GBP/USD

The GBP/USD pair has gained over 1.7% and benefited from the US dollar’s decline on Tuesday. It is convenient to say that UK politics saved the day for sterling bulls. The pair is trading at 1.475

Investors welcomed Rishi Sunak as the new UK prime minister where, in his first speech, he reiterated to place economic stability and confidence at the heart of the government’s agenda.

There has generally been bullish sentiment around Sunak’s appointment, with the FTSE 100 and sterling both rallying on the news. It comes as a relief after the pound fell as low as 1.1100 versus the dollar on Friday and government borrowing costs rose amid fresh warnings about the UK economy.

Sunak, a former banker, is more moderate than Liz Truss, so, he had criticized most of her policies, including the unfunded tax cuts that started this whole mess. Financial markets have steadied since the country U-turned on those policies.

Central bank meetings will kick off this week with the European Central Bank, Bank of Canada, Bank of Japan and conclude next month with the Federal Reserve and Bank of England. Experts are mixed on the UK’s future and there are questions as to whether the UK may be forced to ask the IMF for a bailout.

Despite Sunak’s appointment, the UK can expect severity, low growth and rising inflation as utility bills continue to increase.