The pound rose against the dollar on Thursday ahead of the PM’s expected announcement that he will resign.
Sterling traded above $1.20 as details emerged of a reshuffle to replace a number of ministers who have resigned in the past 48 hours.
Boris Johnson wants to announce that he intends to step down.
XTB Chief Market Analyst Walid Koudmani said that this will “bring some relief to UK investors” and quell the uncertainty.
As the pound rose, it is still 4% lower than a month ago when it was trading around $1.25.
Mr Koudmani said: “Make no mistake [pound] remains severely weak and likely to slide into recession due to the poor state of the UK economy, which is underperforming its peers, while the Bank of England refuses to aggressively raise interest rates to deal with escalating inflation.”
Mr Johnson is expected to announce a cabinet reshuffle and remain as “managing” Prime Minister until the autumn as a leadership race to find a new Conservative leader takes place.
Greg Clark, the former Business Secretary, has been appointed Leveling Up Secretary to replace Michael Gove, who was sacked by Mr Johnson on Wednesday night.
While Mr Johnson is expected to say he will remain in office until the end of this year, some Conservative MPs have called for him to leave sooner.
Economy Minister Kwasi Kwarteng tweeted: “We need a new leader as soon as possible. Someone who can restore trust, heal the country, and demonstrate a new, sane, and consistent economic approach to helping families.”
Kitty Ussher, chief economist at the Institute of Directors, the UK employers’ group, said: “What business hates most is uncertainty and instability, which reinforces the sense of external risks, and the Conservative Party is set to resolve.
“For the future, the priority must be to give companies the confidence to invest in our common economic future.”
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