TThere is a real risk here of the UK falling into a sterling crisis and the new government must do its utmost to avert it. Financial markets have looked at the promises made by the two contenders to be the next prime minister and are concerned. Ominously, since she’s the frontrunner, they’re particularly concerned about plans for Liz Truss.
This is not a political judgment on their likelihood of running a lasting government, or an economic judgment on the likely success or failure of the policies we’ll get a taste of this week. It’s a statement of fact.
The proof? The pound’s fall over the past week, the rise in gilt yields and the extent to which the shares of domestically focused UK mid-caps have been downgraded versus their larger peers that rely more on global markets than domestic ones became one.
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