Tim Graf, Head of EMEA Macro Strategy, State Street, comments on Boris Johnson’s resignation as PM
“Boris Johnson’s resignation does little to change the macroeconomic reality for the UK or the market reality for the pound, where the toxic mix of rising household costs, particularly domestic energy costs, and slowing growth look likely to test any future leader.
“Sterling could be better supported in the coming days with the removal of near-term political uncertainty, but I would see rallies as opportunities to sell given the prevailing economic malaise. Slowing growth should also be a pretext for the Bank of England to slow plans to raise interest rates, further weighing on the pound. However, UK assets might not fare too badly.
“A less proactive MPC could leave gilts more attractive as a consequence. And UK equities, particularly large-cap multinationals, should be able to continue their better relative performance given we expect the weakness of sterling to extend.”