Important Information

You are visiting the international Vantage Markets website, distinct from the website operated by Vantage Global Prime LLP
( www.vantagemarkets.co.uk ) which is regulated by the Financial Conduct Authority ("FCA").

This website is managed by Vantage Markets' international entities, and it's important to emphasise that they are not subject to regulation by the FCA in the UK. Therefore, you must understand that you will not have the FCA’s protection when investing through this website – for example:

  • You will not be guaranteed Negative Balance Protection
  • You will not be protected by FCA’s leverage restrictions
  • You will not have the right to settle disputes via the Financial Ombudsman Service (FOS)
  • You will not be protected by Financial Services Compensation Scheme (FSCS)
  • Any monies deposited will not be afforded the protection required under the FCA Client Assets Sourcebook. The level of protection for your funds will be determined by the regulations of the relevant local regulator.

If you would like to proceed and visit this website, you acknowledge and confirm the following:

  • 1.The website is owned by Vantage Markets' international entities and not by Vantage Global Prime LLP, which is regulated by the FCA.
  • 2.Vantage Global Limited, or any of the Vantage Markets international entities, are neither based in the UK nor licensed by the FCA.
  • 3.You are accessing the website at your own initiative and have not been solicited by Vantage Global Limited in any way.
  • 4.Investing through this website does not grant you the protections provided by the FCA.
  • 5.Should you choose to invest through this website or with any of the international Vantage Markets entities, you will be subject to the rules and regulations of the relevant international regulatory authorities, not the FCA.

Vantage wants to make it clear that we are duly licensed and authorised to offer the services and financial derivative products listed on our website. Individuals accessing this website and registering a trading account do so entirely of their own volition and without prior solicitation.

By confirming your decision to proceed with entering the website, you hereby affirm that this decision was solely initiated by you, and no solicitation has been made by any Vantage entity.

I confirm my intention to proceed and enter this website Please direct me to the website operated by Vantage Global Prime LLP, regulated by the FCA in the United Kingdom

By providing your email and proceeding to create an account on this website, you acknowledge that you will be opening an account with Vantage Global Limited, regulated by the Vanuatu Financial Services Commission (VFSC), and not the UK Financial Conduct Authority (FCA).

    Please tick all to proceed

  • Please tick the checkbox to proceed
  • Please tick the checkbox to proceed
Proceed Please direct me to website operated by Vantage Global Prime LLP, regulated by the FCA in the United Kingdom.

US

×

Watch Reborn a Trader

row

View More
SEARCH
  • All
    Trading
    Platforms
    Academy
    Analysis
    Promotions
    About
  • Search
Keywords
  • Forex Trading
  • Vantage Rewards
  • Spreads
  • facebook
  • instagram
  • twitter
  • linkedin
  • youtube
  • spotify
The Resignation of Liz Truss & Its Impact on The Pound

TABLE OF CONTENTS

The Resignation of Liz Truss & Its Impact on The Pound

The Resignation of Liz Truss & Its Impact on The Pound

Vantage Updated Updated Mon, 2024 January 29 07:49

During the London trading session on 20th October 2022, leader of the governing Conservative party in the UK, Liz Truss, officially announced her intention to resign, leading her to become the shortest-serving prime minister in UK history. In the span of 45 days in office, the economic turbulence that Truss brought to the UK shook out countless of investors as the proposed monetary policies were too impactful.  

Key Points

  • Liz Truss resigned as UK Prime Minister after 45 days in office amidst economic turmoil and criticism over proposed monetary policies, making her the shortest-serving prime minister in UK history.
  • The UK’s economic challenges include a 40-year high inflation rate and energy supply issues exacerbated by the Russia-Ukraine conflict, alongside the Bank of England’s struggle to counter these pressures with rate hikes.
  • The pound experienced a 2.06% decline during Truss’s tenure, with future GBPUSD movements potentially hinging more on the Bank of England’s monetary policies than on the new Prime Minister, Rishi Sunak’s leadership.

UK’s Economic Climate

Just like any other major economy, the UK is currently being eroded by high inflation from monetary policies during the Covid-era. On 21st October 2022, consumer price index figures in the UK rose to 40-year highs at 10.1% [1]. The Bank of England’s (BoE) has attempted to quell the heat of inflation through an aggressive rate hike cycle, but efforts seem to be futile.  

Fuelling the inflation flames is the on-going Russia-Ukraine war which has depleted the supply of energy to nearby nations such as UK and the Eurozone. Before the conflict, Russia supplied the UK with gas, oil, and coal. However, the import of gas and coal were cut-off as the conflict escalated. While the UK does not rely on Russian energy as much as other European nations, the inflationary impact due to lack of supply can be felt through the UK [2]

In the meantime, the UK government were discussing and planning possible energy bills to curb the energy-related inflationary pressures.  

Timeline of Liz Truss [3]

  • 5th September 2022 – Truss is elected as prime minster of the UK. Previously serving as Britain’s Secretary of State for Foreign, Commonwealth and Development Affairs and Minister for Women and Equalities, Truss replaced former prime minister Boris Johnson.
  • 8th September 2022 – Prime minister Truss plans to put a cap on domestic energy prices. 
  • 23rd September 2022 – Finance minister Kwarteng proposes “mini-budget” to parliament with support from Truss. This involves massive tax cuts which attempts to boost economic growth and generate increased revenue. 
  • 24th September 2022 – International Monetary Fund (IMF) speaks about the UK economy, calling for a reversal in tax policy. 
  • 26th September 2022 – Potential massive tax cuts throw UK financial markets into a turmoil, leading the Pound to fall to an all-time low against the US Dollar. The BoE was forced to step in to support the bond market and prevent a possible wider economic collapse. 
  • 27th September 2022 – Opposition parties accuse the UK government of “losing control of the British economy”.
  • 12th October 2022 – The BoE stops support for the UK bond market, leading to the Pound’s further decline. Official economic figures in the UK declines with additional fears of recession from the BoE’s aggressive rate hike cycle. 
  • 13th October 2022 – During the IMF meeting in Washington, the UK governments monetary proposals are heavily criticised by global financial leaders. 
  • 14th October 2022 – Truss fires political ally Kwarteng and hires Hunt as replacement.
  • 17th October 2022 – Hunt issued a statement to reverse all tax cuts from the proposed “mini-budget”. 
  • 20th October 2022 – Liz Truss resigns as prime minister of the UK after 45 days. 

Impact on GBPUSD

 Liz Truss resignation

Figure 1 – GBPUSD Daily (https://www.tradingview.com/x/qCGbDkcl/)

Throughout the 45 days Liz Truss was prime minister, GBPUSD declined a total of 2.06%. With Pound weakening from UK’s government policies and the US Dollar rapidly gaining in value, this led to GBPUSD sinking to 1.30565, creating all-time lows and sinking to levels not seen since 1985.  

After much persuasion from the IMF and intervention from the BoE, the pound recovered some of its losses, climbing back up from its all-time lows and is currently trading within a consolidation [4].

What’s next for the UK?

Even though Truss has resigned, the geopolitical and economic conditions appear to be bleak. Inflation is still plaguing the nation, recessionary fears are growing exponentially as BoE aggressively raise interest rates, and reduction of energy supply from Russia are still dominant news headlines in the UK. Moving forward, the new prime minister, Rishi Sunak, would need to heal the economic damage that Truss has caused while in power.  

As the Pound moved aggressively lower during the time Truss was prime Minister, the future movement of GBPUSD may not be dependent on who Sunak is. Rather, it could be dependent on what the BoE’s monetary policy is, more specifically, on interest rates. With inflation at all-time highs and interest rates at 2.25%, an even more aggressive rate hike of 75 bps could be what the Pound needs to start its bullish run.  

References

  1. Gooding, P. (2022, September 14). Consumer price inflation, UK – Office for National Statistics. Retrieved October 21, 2022, from https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/august2022
  2. Bolton, P. (2022, October 22). Imports of fossil fuels from Russia. House of Commons Library. https://commonslibrary.parliament.uk/research-briefings/cbp-9523/
  3. Sandford, A. (2022, October 14). Truss in trouble: A timeline of key events in three months of UK political chaos. Euronews. Retrieved October 21, 2022, from https://www.euronews.com/2022/10/14/truss-timeline-key-events-in-three-months-of-political-chaos-in-british-politics
  4. Brady, S. (2022, October 1). British Pound Hits All Time Low Against The Dollar. What’s Next? Forbes Advisor. https://www.forbes.com/advisor/money-transfer/usd-to-gbp-forecast/
  • vantage academy open account

    Open Trading Account

    Discover the endless trading possibilities with our cutting-edge platform, designed to empower both beginners and seasoned traders alike.

  • vantage academy app

    Download Vantage App

    Trade on the go with the Vantage All-In-One Trading App, where smooth execution and market access come together in the palm of your hand.

  • vantage academy start trading

    Start Trading

    Are you an existing user? Login to your account to start trading 1,000+ products including forex, indices, gold, shares and more.