Pound up for third day as May prepares to take office

  • Business
  • Wednesday, 13 Jul 2016

Next PM: May is poised to take office by tonight London time. — Bloomberg

LONDON: The pound climbed for a third day as Home Secretary Theresa May prepared to take over as the UK’s next prime minister, removing one layer of political uncertainty after the country voted last month to leave the European Union (EU).

Sterling rose to its highest level in a week versus the US dollar as investors digested the implications of the new premiership on the UK’s negotiations with the EU over its withdrawal from the bloc.

May is poised to take office by tonight London time, replacing David Cameron after her only rival pulled out of the Conservative leadership contest on Monday. The FTSE 100 Index of shares advanced for a fourth day, touching an 11-month high.

“Now the way is clear for May” to apply for an exit from the EU, said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt.

“There may be hopes that the whole process of uncertainty will be shortened.”

The UK currency fell to a 31-year low of US$1.2798 on July 6. Sterling strengthened for a fourth day against the euro, appreciating 0.5% to 84.65 pence.

Bank of England (BoE) governor Mark Carney testifies to parliament’s Treasury committee at 10am London time yesterday.

The central bank will announce tomorrow its first policy decision since the June 23 referendum on EU membership.

Speculation is building that policymakers will cut interest rates in an effort to spur growth amid signs the decision to leave the world’s biggest trading bloc shook confidence in the economy.

Futures pricing shows the chances of a rate cut by the BoE this week have climbed to 80%, compared with 11% on the day of the EU referendum.

UK government bonds fell for a second day, with benchmark 10-year gilt yields rising three basis points, or 0.03 percentage point, to 0.79%.

The yield dropped to an all-time low of 0.708% on Monday. — Bloomberg

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