Pound falls to fresh low as Liz Truss becomes new UK prime minister

·Reporter
·2-min read
Liz Truss was appointed the UK's next prime minister and leader of the Conservative Party. The pound made up some ground following the announcement on Monday. Photo: Geoff Caddick/AFP via Getty
Liz Truss was appointed the UK's next prime minister and leader of the Conservative Party. The pound made up some ground following the announcement on Monday. Photo: Geoff Caddick/AFP via Getty

The British pound (GBPUSD=X) appears to be unmoved by the outcome of the Tory leadership race.

Liz Truss was announced as the next leader of the Conservative party and the new occupant of Number 10 Downing Street.

Truss succeeds Boris Johnson, and beat former chancellor Rishi Sunak in the race to become new prime minister.

Read more: Kwasi Kwarteng set to become UK's first Black chancellor

Sterling slid to its weakest level against the dollar ahead of the announcement on Monday afternoon, to as low as $1.144 — its lowest level since March 2020. It made up a little ground following the announcement to $1.500.

Against the euro (GBPEUR=X) the pound was little moved, up 0.2% to €1.158.

Truss, who said she "campaigned as a Conservative and will govern as a Conservative prime minister", in her maiden speech as PM, promised tax cuts and a new energy plan within the week.

Thanim Islam, market strategist at international business payments specialist Equals Money, said "Immediate tax cuts could well give the Bank of England freedom for larger or faster rate hikes to battle sticky and rising inflation.

"But as we have seen in recent weeks, higher rate expectations haven't been enough to give support to the pound.

"There is a dire growth outlook on the UK at the moment and until we see Truss address this then sterling's outlook will most likely stay negative."

But the pound was not the only currency performing worse this year amid rampant inflation, a looming economic slowdown and political uncertainty.

The euro (EURUSD=X) also plummeted against the dollar as the energy crisis threatens to push the bloc into recession. The common currency fell below 0.99 cents for the first time since December 2002, down 0.7% to $0.9884 in early trading.

"As a storm erupts over energy supplies and fears mount that European industries may have to scale back some production in the months to come, the euro has dipped below parity with the dollar, for the first time in two decades," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"The euro fell to $0.988, the lowest level since 2002, while the pound hit a new two and a half year low at $1.144."

On Friday, Kremlin-controlled gas company Gazprom (GAZP.ME) said it will not turn the Nord Stream pipeline back on after three days of maintenance, blaming an oil leak at a gas turbine that helps pump the fuel into the pipeline.

Watch: Tory leadership: Liz Truss wins race to be next prime minister