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Boris Johnson set to resign as UK Prime Minister

07/07/2022 | 05:30am EDT
British government crisis

LONDON (Reuters) - Boris Johnson will announce his resignation as British Prime Minister on Thursday, a government source said, after he was abandoned by ministers and his Conservative Party's lawmakers who said he was no longer fit to govern.

REACTION FROM FINANCIAL MARKETS:

News of Johnson's imminent resignation helped push the domestically focused FTSE 250 index to a one-week high as the pound strengthened. It was last up 0.8%. The FTSE 100 index eased slightly and was up 1%.

Against the U.S. dollar, the British pound rose to $1.1994, up 0.6% at the day's high, from $1.1938 before the news broke. It hit a March 2020 low of $1.1887 on Wednesday.

QUOTES

COLIN ASHER, SENIOR ECONOMIST, MIZUHO, LONDON:

"It's hard to see sterling going much lower than here. There was a bit of a pop when he said he was going but first, most of it is already in the price in the wake of recent events. Second, this fight is about personality and probity rather than policy.

"The market assumption is that policy won't change significantly. I don't think the new guy will come in with massive tax cuts. There will be tinkering and even before this week people expected more fiscal relief in the autumn when bills go up. Probably we get looser fiscal policy but because the fight is not about policy, any expectations for policy change will be relatively modest in this environment."

PHILIP SHAW, CHIEF ECONOMIST, INVESTEC, LONDON:

"It's normal when you see political chaos of this nature that it drags a currency down.

"For the sterling reaction, we're looking at three possible things. Firstly, this is the final phase in what's been an uncertain period, about who stays at number 10 or who is at number 10. Secondly it's possible we'll get a less confrontational set of negotiations with the EU on the Northern Ireland protocol, which reduces the risk of trade tensions between the EU and the UK, which is positive for sterling.

"Thirdly, with Boris Johnson no longer as prime minister, one could argue that the campaign for Scottish independence will take a bit of a knock, perhaps that's reduced the risk of a pro-Scottish independence vote if one is granted next Autumn."

(Reporting by the London markets team; Compiled by Saikat Chatterjee; Editing by Catherine Evans)


© Reuters 2022
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