GBP Falls as UK PM Resigns Making Her Shortest Serving UK PM In History

Another day, another confusing UK political development. In a remarkable twist of events, the new UK PM Liz Truss resigned her position yesterday, after just 45 days, making her the shortest serving UK PM in history. The decision comes on the back of a chaotic few weeks following the controversial mini budget which rocked UK markets to the core and saw the BOE having to step in with emergency bond purchases.

The conservative party now begins a fresh leadership contest with hopefuls needing to secure the backing of at least 100 MPs by Monday. If more than one does this, party members will vote between the candidates with a winner selected by next Friday (oct 28th ). Rishi Sunak is seen as an early favourite, along with speculation that former PM Boris Johnson might also run. While GBP was higher initially on news of truss’ resignation, GBP has since turned lower.

Key Factors for Today

- USD turning higher again as risk backdrop weakens
- UK PM quits, causing fresh turmoil
- Equities soften amidst growing risk aversion
- GBP and risk currencies fall as USD strengthens on Friday
- Oil and metals lower – gold testing YTD lows

Coming Up

- CAD Canadian retail sales
- EUR Eurozone consumer confidence
- USD Fed’s Williams speaks

Equities Under Pressure As USD Rises

We’re seeing a mostly bearish end to the week for equities markets with most indices trading in the red on Friday following the reversal from initial highs earlier in the week. The US Dollar is finding fresh demand on Friday which is exerting downside pressure on stock markets. The risk backdrop is broadly negative given the political uncertainty in the UK and broader recession fears. However, US earnings season has continued to impress with the majority of those reporting beating estimates.

Blackstone Falls As Economic Conditions Bite

Yesterday, Blackstone reported Q3 EPS of $1.06 beating estimates for EPS of $0.98 on revenues of $2.59 billion, again beating estimates for revenues of $2.32 billion. However, Blackstock shares were seen falling as the company cited the impact of tighter financial conditions and sinking stock values as it noted sales of just $15 billion of assets, only half of the figure over the prior quarter.

GBP Hit By Political Uncertainty & Retail Sales Miss

In FX, fresh strength in the US Dollar is the main story across the European open on Friday. The Dollar move is leaning heavily on risk currencies with both AUD and NZD trading lower today, in line with weaker equities and commodities prices. GBP is among the weaker performers today also. Not only is GBP being hit by political uncertainty linked to the UK PM resigning but also a set of weaker-than-expected UK retail sales figures received today. Negative retail sales are seen as heightening the risk of recession in the UK, keeping GBP pressured for now.

Metals & Oil Fall on Fresh USD Strength

In the metals and commodities space, both gold and silver are turning lower today with gold prices currently testing the 2022 lows as USD turns higher. With further hawkish commentary likely from Fed’s Williams today, the outlook remains negative for metals into next week. Oil prices, too, have been unable to shrug off the latest round of USD strength with crude futures softening from yesterday’s highs and looking vulnerable to further losses near-term.