The value of sterling shot up and UK government borrowing costs rose in response to the surprise resignation of the Chancellor of the Exchequer, Sajid Javid, on Thursday.
The pound jumped more than half a per cent after it emerged at midday that Mr Javid had tendered his resignation in response to a demand from 10 Downing Street that he merge his advisory team with that of the Prime Minister.
Sterling, which had been trading at $1.2982 before the news, rose to $1.3041 within the hour.
By mid afternoon it had extended its gains to $1.3067, putting the currency on course for its largest daily rally of the month.
UK 10-year market borrowing rates – known as gilt yields – also rose from 0.61 per cent to 0.69 per cent in response to the news.
Several currency analysts said the sharp market moves suggested traders were expecting more public spending in the 11 March Budget from the new chancellor, Rishi Sunak, relative to what Mr Javid – who had signalled a determination to keep public spending on a relatively tight leash over the Parliament – would have implemented. Read more