Pound higher as UK Prime Minister Truss resigns

…after failed budget, market turmoil

The pound was up 0.4 percent against the dollar on Thursday shortly after UK Prime Minister Liz Truss announced her resignation, trading at $1.1273, briefly touching a session high.

Truss resigned following a failed tax-cutting budget that rocked financial markets and which led to a revolt within her own Conservative Party.

“We set out a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit,” Truss said in a statement outside Downing Street.

“I recognize though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to announce that I am resigning as leader of the Conservative Party,” she said.

Truss was appointed prime minister on Sept. 6, just two days before Queen Elizabeth II passed away after 70 years on the throne.

On Sept. 23, Truss’ finance minister, Kwasi Kwarteng, announced a so-called “mini-budget” which began a turbulent period for U.K. bond markets which balked at the debt-funded tax cuts he put forward. Most of the policies were reversed three weeks later by the second finance minister, Jeremy Hunt.

The pound remains at the level it was on Sept. 22, before Truss’ market-moving budget. The yields on 10-year and five-year gilts (U.K. sovereign bonds) were both down by around 5 basis points after Truss’ brief speech.

Neil Wilson of Market.com said although Truss’ “sorry reign” is over, there is still huge uncertainty about whether the Tory party can survive in power.

That uncertainty means there’s not a firmer move in the markets (the FTSE 100 has now dropped back into the red for the day).

“The economic policies were already dead in the water so the market doesn’t have a huge amount of genuine new information to move on despite the seismic events of the last 24 hours,” said Wilson.

Truss beat Rishi Sunak to become leader of the Conservative Party following the resignation of Boris Johnson on July 7.

Her resignation follows a meeting with Graham Brady, the Conservative politician that is in charge of leadership votes and reshuffles. Brady chairs the 1922 Committee — the group of Conservative MPs without ministerial positions who can submit letters of no confidence in the prime minister.

Just before the meeting, a Downing Street spokesperson told reporters Truss wanted to stay in office.

During the hour the meeting lasted, the number of MPs publicly calling for Truss to step down reached 17. The number who have written letters to Brady expressing no confidence in the prime minister was reported to be over 100 by Thursday.

Truss said outside Downing Street that she and Brady had agreed the party would complete a leadership election within the next week.

Sunak is now one of the favourites to replace Truss, along with Hunt, another leadership contender Penny Mordaunt, Defence Minister Ben Wallace, and former Prime Minister Boris Johnson.

Opposition parties Labour, the Scottish National Party and the Liberal Democrats called for an immediate general election on Thursday afternoon.

“The Conservative Party has shown it no longer has a mandate to govern,” Labour leader Keir Starmer said.