Politics and GBP
They say a week is a long time in politics. If we misinterpret this famous phrase, for the likes of Liz Truss and her increasingly forgotten Chancellor Kwasi Kwarteng it was virtually an entire tenure in office. Perhaps this is all too fresh in the rear view mirror of Conservative Party politics for a Tuesday morning. Instead let’s look at what I’m sure any of you with an exposure to GBP have been asking yourself. Do the political headlines and the surprise return of David Cameron to Cabinet mean anything for me and the currency?
Time will certainly be passing slowly for Rishi Sunak and his team as they attempt to dominate the narrative amongst the public and media alike. Rishi’s cabinet reshuffle, which now looks to be well underway, could be seen as one of two things. On the one hand it could be interpreted as a necessary reshuffle with a careful consideration for the not-so distant general election. On the other it could be interpreted as a desperate attempt to improve the fortunes of a government increasingly losing ground to the opposition and a cabinet that appears at times to be out of control. So far, yesterday, GBP has fared relatively well not feeling the risks that the less sanguine interpretation of this week’s political events could imply.
Recently we have suggested that when GBP wakes up to the prospect of a general election just around the corner, a risk-adjusted discount could be built into Sterling valuations. Attention to British politics may only help to hasten that adjustment in pricing. However, provided that the rhetoric and market interpretation of the reshuffling of the Conservative Party front bench continues to be positive, GBP may be able to hold on as it did yesterday.
Discussion and Analysis by Charles Porter
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