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The British pound jumped by nearly half a percent against the U.S. dollar and stocks rallied on Thursday morning following media reports of Prime Minister Boris Johnson’s imminent resignation which will end a political crisis that began earlier this week after several senior ministers resigned from Johnson’s cabinet.
Following news of the resignation, the pound rose 0.5% against the dollar and nearly reached $1.20 before settling at $1.197.
Although the U.K. stock markets had not previously reacted to the political drama at Downing street, the London Stock Exchange’s marquee FTSE 100 index was up more than 1% in morning trading.
The more mid-cap focussed FTSE 250 index also rose more than 0.8%.
Walid Koudmani, chief market analyst at brokerage firm XTB told The Telegraph: “The resignation of Boris Johnson as UK PM will breathe a sigh of relief for UK investors as it curtails the uncertainty of a government in name only…the GBP remains severely weak due to the dire state of the UK economy which is underperforming its peers, likely to enter into a recession.”
According to the British betting website Ladbrokes, the country’s international trade minister Penny Mordaunt is the bookmakers’ favorite to replace Johnson as the leader of the conservative party with odds of 5/1. Mordaunt is trailed closely by the former Chancellor of the Exchequer Rishi Sunak.
According to British media reports, Boris Johnson will step down as the leader of the Conservative Party after several days of political turmoil. Johnson, however, plans to remain as caretaker Prime Minister until his party elects a new leader. Over the past few months, Johnson’s premiership has been besieged by several high-profile political scandals including his handling of sexual misconduct allegations against a colleague and reports of multiple parties at 10 Downing Street while the rest of the U.K. was under lockdown due to the Covid pandemic. The political turmoil reached a tipping point earlier this week as multiple senior ministers resigned from their positions while questioning Johnson’s behavior and his ability to serve as prime minister. Johnson initially appeared combative and refused to resign as he appointed several replacements for the vacant cabinet seats. However, the tide appeared to turn against Johnson on Thursday as one of his new appointees resigned after just 48 hours and his newly appointed chancellor also urged him to resign.
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