GBP/USD Finds Immediate Support as UK PM Sunak Hits the Ground Running

UK politics is headline news again but for the right reasons. On Tuesday, King Charles III appointed Rishi Sunak as the new UK Prime Minister.

Following his appointment, PM Sunak did not mince his words, reportedly saying,

“The government I lead will not leave the next generation, your children and grandchildren, with a debt to settle that we were too weak to pay ourselves.”

On Tuesday, Bank of England Chief Economist Huw Pill was also in the spotlight, sharing his views on the short-lived Liz Truss government. Pill reportedly highlighted the lack of cooperation between the Government, the Office for National Statistics, and other economic institutions.

Emphasizing the cooperation between the Bank of England and statisticians, Huw Pill reportedly stated,

“That’s a model for how macro policymakers in the UK should respect the institutional framework when they interact with one another.”

The timing of the Chief Economist’s comments coincided with Sunak’s first day as UK Prime Minister.

For the Bank of England, the departure of Liz Truss may ease pressure on the new Government to complete a review of the Bank’s independence and mandate. Liz Truss had vocalized her support for a review of the BoE mandate before her untimely departure.

The new British Prime Minister may have other priorities over the near term.

A New Prime Minister, a New Cabinet, and a New Day

This morning, news hit the wires of Prime Minister Sunak bringing together his newly appointed Cabinet just one day after formally becoming Prime Minister.

While the PM will need to deliver assurances and bring unity to the Tory Party, his first order of business will be to prepare for the much-talked-about fiscal statement.

Currently, the fiscal statement is due on October 31. However, the new Government may push the date back to have sufficient time to find the ways and means to plug a sizable budget shortfall of as much as £40 billion.

Sunak chose to retain Jeremy Hunt as the Chancellor, which means the Cabinet will have Hunt’s initial views to consider and use as a base rather than work from a fresh canvas.

Government commentary ahead of the fiscal statement will draw plenty of attention. However, the fiscal statement will be Rishi Sunak’s first real test. Chancellor Jeremy Hunt and PM Rishi Sunak have a real-case scenario of how badly things can go wrong if the measures don’t meet expectations.

This morning, the financial markets remain optimistic about the new Government’s capabilities.

The GBP/USD is up 0.90% to $1.15749, with the UK Gilt 10-year yield down 5 basis points to 3.57%. The UK Gilt 10-year yield had breached 4.0% in response to the mini-budget.