Pound Rises With U.K. Closer to Getting Its Next Prime Minister

  • Britain to have new premier by Wednesday night, Cameron says
  • Situation ‘doesn’t change fundamental picture’ for pound: BNP

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The pound rose against the dollar as U.K. Prime Minister David Cameron said his replacement would be installed by Wednesday night, lifting the uncertainty over the nation’s leadership following the Brexit vote.

Theresa May, already a senior minister in Cameron’s government, is the sole candidate to replace him after Conservative Party leadership hopeful Andrea Leadsom announced she was withdrawing from the contest earlier in the day.

As the political developments emerged, sterling erased a drop of as much as 0.8 percent, before rallying 0.5 percent. It was up 0.2 percent at $1.2983 as of 4:12 p.m. London time, compared with a 31-year low of $1.2798 reached on July 6.

“At least now you know who will be leading the U.K,” said Petr Krpata, a currency strategist at ING Groep NV in London. “The battle for the leadership could have been protracted,” meaning “additional uncertainty for the already battered pound.”

The other major event for sterling this week is the Bank of England meeting on Thursday -- the first since the historic June 23 referendum on membership of the European Union.

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Speculation is building that officials will lower interest rates at the meeting in an effort to spur growth amid signs the referendum shook confidence in the economy. The chance of a cut has risen more than sevenfold since the vote to 79 percent. Economists surveyed by Bloomberg are less certain, though, with only a slim majority forecasting a reduction at this week’s gathering.

Home Secretary May, 59, supported the campaign to remain within the EU, but on Monday gave a speech saying “Brexit means Brexit, and we’re going to make a success of it.”

For more on the political situation in the U.K., click here.

While she didn’t mention it Monday, May said when she announced her bid to succeed Cameron in June that she’d wait until at least next year before triggering the mechanism that would lead to Britain leaving the EU. Leadsom backed the campaign to quit the bloc.

“This is a small sterling positive to the extent that it reduces some of the uncertainty,” said Sam Lynton-Brown, a currency strategist at BNP Paribas SA in London. “But it doesn’t change the fundamental picture.”

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