Shocking News of UK Chancellor Resignation Leads to Spike in GBP/JPY
Shocking News of UK Chancellor Resignation leads to Spike in GBP/JPY
In a surprising move for the British government, it has been revealed that Chancellor of the Exchequer Sajid Javid has resigned after he refused Prime Minister Boris Johnson’s order to fire five of his senior aides. He has been replaced by Rishi Sunak, and various other members of the Treasury cabinet have also been replaced as well.
The Chancellor’s office is one of the most powerful in the British parliament, only below that of the Prime Minister, and is in charge of all economic and financial matters relating to the United Kingdom.
Mr Javid served as Chancellor for only 7 months, having been appointed by the Boris Johnson cabinet after the Conservative government victory in July 2019. He was just 26 days from delivering his first budget proposal, and is one of the few Chancellors to not have delivered a budget proposal during his tenure. His time as Chancellor is one of the shortest since the Second World War.
In contrast to Mr Javid, Rishi Sunak is a relative newcomer to the political sphere, previously serving as a junior housing minister. His promotion to Chancellor makes him one of the fastest rising politicians in recent British political history.
He said to be a firm believer in Brexit and one of Boris Johnson’s favourite ministers, having filled in for him in a seven-way debate before the general election last December.
In terms of the effect that this move will have on the GBP, analysts suggest that Sunak’s appointment will lead to greater government spending, in order to stimulate the economy and boost growth post Brexit. Due to his relative inexperience, and with the budget proposal closing in rapidly, Mr Sunak is expected to receive major advice from Johnson’s advisors.
The market certainly seems to have reacted like next month’s proposal will include a fiscal stimulus, as immediately following this news the Pound Sterling surged against the Japanese Yen, rising from 142.29 to a high of 143.45.
Philip van den Berg at BlackBull Markets gives a more detailed analysis on the possible short term trade opportunities for the Pound/Yen here:
When we last looked at gold at the beginning of the month, it had hit a brief dip coinciding with the NFP release, but since then has come back with a vengeance, reaching further and further heights.
The Kiwi dollar is on the downside once again, as after it peaked at 0.63950 cents against the US Dollar, it then managed to plummet down almost 1% to 0.63630 in the course of just one hour. During the rest of the day, it reached a low of 0.63530 twice before steadying off slightly.
The Euro only continues to drop lower and lower. When we looked at the EUR/USD pair on the 7th, it was at a 4-month low. When we revisited it just under a week ago, it had managed to hit a low not reached since April 2017. And now the Euro has dropped further still, sinking below the 1.0800 mark. It seemed to recover slightly, but has now dropped back down, leading to a 34-month low.
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