The value of sterling shot up and UK government borrowing costs rose in response to the surprise resignation of the Chancellor of the Exchequer, Sajid Javid,
The pound jumped more than half a per cent after it emerged at midday that Mr Javid had tendered his resignation in response to a demand from 10 Downing Street that he merge his advisory team with that of the Prime Minister.
Sterling, which had been trading at $1.2982 before the news, rose to $1.3041 within the hour. By mid afternoon it had extended its gains to $1.3067, putting the currency on course for its largest daily rally of the month.
However, some analysts cast doubt on the idea that Mr Sunak’s arrival would result in a major change in public spending levels relative to current plans, which were already set to include substantially greater investment spending.
“I very much doubt it will in fact have any material implications for near-term borrowing, investment and [government bond] issuance numbers,” said John Wraith, the head of UK rates strategy at UBS.
Treasury sources said there were no current plans to move the Budget back from its 11 March date although that this would be considered by the new team.