Investment experts from across the industry have reacted to the dramatic exit of Boris Johnson as leader of the Conservative party and his notice on terminating his UK premiership once a new leader is found.
Tim Graf, Head of EMEA Macro Strategy, State Street, said: "Boris Johnson's resignation does little to change the macroeconomic reality for the UK or the market reality for the pound, where the toxic mix of rising household costs, particularly domestic energy costs, and slowing growth look likely to test any future leader.
"Sterling could be better supported in the coming days with the removal of near-term political uncertainty, but I would see rallies as opportunities to sell given the prevailing economic malaise. Slowing growth should also be a pretext for the Bank of England to slow plans to raise interest rates, further weighing on the pound.
"However, UK assets might not fare too badly. A less proactive MPC could leave gilts more attractive as a consequence. And UK equities, particularly large-cap multinationals, should be able to continue their better relative performance given we expect the weakness of sterling to extend."
Chris Beauchamp, chief market analyst at IG Group, the trading platform, said: "The pound has been looking for any excuse to bounce against the dollar following its drubbing lately. Boris' decision to go removes at least some of the uncertainty, and means that a snap election is off the cards. Longer-term the outlook is still bleak for the pound, so this bounce is unlikely to last.
Mike Owens, global sales trader at Saxo Markets, said: "We've seen GBP pop about 0.5% higher on news that Boris Johnson has decided to resign as prime minister. Although predominately driven by the strong dollar, another less significant factor pushing the pound lower over recent weeks has been the political uncertainty, so I think we can expect to see some relief being priced into the UK currency as more details of Johnson's plan to step down are announced.
"Financial markets prefer certainty, and this situation is no different. We also see the FTSE 250 hitting the highs of the session, although it's a strong morning for European equities in general and difficult to attribute much of the move to the political headlines."
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: ‘'The clash of political camps and the row over whether the Prime Minister should stay or go is over. With the mood music changing so abruptly in Westminster and Boris Johnson finally deciding to leave 10 Downing Street, the pound lifted against the dollar, heading back up to $1.20 before dipping back slightly.
"With the rollcall of resignations now being updated by the minute, and his newly appointed Chancellor of the Exchequer even calling for him to go, his position looked untenable. The pound's wavering path indicates that that traders believe it's not quite the end to the political stalemate.
"Mr Johnson is set to stay in position until the Autumn, and the battle is already commencing over who will be the next leader.
"There is a cacophony of problems on the next Prime Minister's plate, not least the cost-of-living crisis causing voters so much financial pain. Plus the trading relationship with the EU is still fraught with difficulty given the bill to amend the Northern Ireland protocol. Mooted tax cuts by the new chancellor may be popular with the electorate but risk making the Bank of England's task of trying to bring down demand and inflation by raising rates even trickier."
