Pound jumps after Sajid Javid storms out of No.11 and is replaced by Rishi Sunak
Sajid Javid’s shock resignation triggered a surge in the value of the pound as speculators gambled on his young successor ramping up public spending and cutting taxes.
After dipping slightly when the Chancellor’s departure was announced, sterling rallied dramatically after it was confirmed that he will be replaced by his number two, 39-year-old Rishi Sunak.
The upheaval at Number 11 – less than a month before Javid was due to deliver his first budget – would normally be expected to rattle financial markets.
After dipping when Sajid Javid’s (left) departure was announced, sterling rallied dramatically after it was confirmed that he will be replaced by 39-year-old Rishi Sunak (right)
But investors piled into sterling in the hope Sunak – chief secretary to the Treasury and an ally of Number Ten – will deliver a more radical budget to kick-start the economy.
Prior to the announcement that Javid had quit, a pound was worth $1.298. Within minutes it fell to $1.296, before surging as high as $1.3069.
Javid had fallen out with Boris Johnson’s most senior adviser Dominic Cummings, after resisting plans to increase borrowing.
He was viewed as a traditional Conservative chancellor, focused more on balancing the books than on delivering some of the bold changes envisioned by Cummings and the Prime Minister.
Paul Dales, chief UK economist at Capital Economics, said: ‘The unexpected resignation of Sajid Javid and the promotion of Rishi Sunak could mean that fiscal policy will provide an even bigger boost to GDP growth over the next few years than we already expected.
‘The move seems designed to allow the Government to push through even bigger increases in public investment and perhaps resuscitate tax cuts that previously looked dead in the water.’
Dales pointed out that as well as being an ardent Brexiteer, Sunak’s voting history shows he supported cuts to corporation tax and capital gains tax, while publicly backing spending on the kind of big infrastructure projects favoured by Johnson.
‘So this is either going to be a meeting of minds or Sunak will be the Prime Minister’s ‘yes man’ living in Number 11,’ he said.
Neil Wilson, chief market analyst for Markets.com, said: ‘The fiscal floodgates are about to open – whatever brake the Treasury might have had on Number Ten has been cut entirely with this move.’
Javid, 50, quit after being told by Number Ten he would have to sack his advisers to remain in post. In a sign of his toxic relationship with Number Ten, the son of a Pakistani bus driver was nicknamed Chino – ‘Chancellor in name only’.