London Daily

Focus on the big picture.
Saturday, Jul 19, 2025

Pound rises as Liz Truss announces resignation

Pound rises as Liz Truss announces resignation

The pound rose against the dollar and government borrowing costs dipped as the markets reacted to Prime Minister Liz Truss's resignation.

Sterling hit $1.13 as the Ms Truss made her announcement and rose higher in the afternoon before falling back to $1.12.

One analyst said investors were "relieved" by the news, despite a lot of uncertainty remaining.

Business groups said the new prime minister would have to act quickly to restore confidence.

A fall in the value of the pound increases the price of goods and services imported in to the UK from overseas - because when the pound is weak against the dollar or euro, for example, it costs more for companies in the UK to buy things such as food, raw materials or parts from abroad.

A weaker pound can push rising costs higher as well if companies choose to pass on higher prices to customers. For people planning a trip overseas, changes in the pound affect how far money can go abroad.

While the pound plunged to a record low against the dollar last month, government borrowing costs rose sharply in the aftermath of the government promising huge tax cuts in its mini-budget without saying how it would pay for them.

But these costs fell back after the Bank of England stepped in with an emergency support programme, and after Jeremy Hunt reversed nearly all the mini-budget measures when he became chancellor.

Mr Hunt is due to announce plans for spending and tax on 31 October in his economic plan, which the Treasury confirmed was set to go ahead, although there are reports it could be delayed due to the Conservative leadership contest.

"Although the resignation of Liz Truss as prime minister leaves the UK without a leader when it faces huge economic, fiscal and financial market challenges, the markets appear to be relieved," said Paul Dales, chief UK economist at Capital Economics.

"But more needs to be done and the new prime minister and their chancellor have a big task to navigate the economy through the cost of living crisis, cost of borrowing crisis and the cost of credibility crisis."

Simon French, chief economist at Panmure Gordon, said the market reaction had been "fairly muted", with investors waiting for the "detail of what comes next".


Ms Truss said her successor would be elected in a Tory leadership contest, to be completed in the next week. Her resignation came after a key minister quit and Tory MPs rebelled in a chaotic parliamentary vote on Wednesday.

Mr French said the markets could rally "more aggressively" if a clear favourite emerged for PM. "The sooner you get there the more likely the person who has won will have the support to do the difficult stuff."

The head of the CBI business lobby group, Tony Danker, said: "The politics of recent weeks have undermined the confidence of people, businesses, markets and global investors in Britain.

"[The next prime minister] will need to deliver a credible fiscal plan for the medium term as soon as possible, and a plan for the long-term growth of our economy."

The interest rate - or yield - on UK government bonds for borrowing over a 10-year period climbed above 4% at one point on Thursday morning, but then fell back steadily as speculation grew about the possible departure of Ms Truss.

Typically, the government agrees to repay the investor on a certain date in the future when a bond "matures". In the meantime, it pays interest on the loan.

However, the mini-budget hit confidence in bonds, and it led to investors demanding a much higher rate of interest in return for investing in them. Some bonds halved in value.

Following the PM's statement, the yield edged higher again to about 3.8%, but still remained below the level seen at the start of the day.

Ahead of Liz Truss's resignation, Bill Blain of Shard Capital had told the BBC that the markets had been "watching in a kind of stunned, open-mouthed horror" at political events.

"The problem we've got is that the last couple of weeks has really destroyed the image of political competency and that's one of the key elements to make any economy work," he said.

Newsletter

Related Articles

0:00
0:00
Close
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
Microsoft, US Lab to Use AI for Faster Nuclear Plant Licensing
Trump Walks Back Talk of Firing Fed Chair Jerome Powell
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Irish Tech Worker Detained 100 days by US Authorities for Overstaying Visa
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
Hong Kong Advances Digital Asset Strategy to Address Economic Challenges
Australia Rules Out Pre‑commitment of Troops, Reinforces Defence Posture Amid US‑China Tensions
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
U.S. Resumes Deportations to Third Countries After Supreme Court Ruling
Excavation Begins at Site of Mass Grave for Children at Former Irish Institution
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Defends Attorney General Pam Bondi Amid Epstein Memo Backlash
Renault Shares Drop as CEO Luca de Meo Announces Departure Amid Reports of Move to Kering
Senior Aides for King Charles and Prince Harry Hold Secret Peace Summit
Anti‑Semitism ‘Normalised’ in Middle‑Class Britain, Says Commission Co‑Chair
King Charles Meets David Beckham at Chelsea Flower Show
If the Department is Really About Justice: Ghislaine Maxwell Should Be Freed Now
NYC Candidate Zohran Mamdani’s ‘Antifada’ Remarks Spark National Debate on Political Language and Economic Policy
President Trump Visits Flood-Ravaged Texas, Praises Community Strength and First Responders
From Mystery to Meltdown, Crisis Within the Trump Administration: Epstein Files Ignite A Deepening Rift at the Highest Levels of Government Reveals Chaos, Leaks, and Growing MAGA Backlash
Trump Slams Putin Over War Death Toll, Teases Major Russia Announcement
Reparations argument crushed
Rainmaker CEO Says Cloud Seeding Paused Before Deadly Texas Floods
×