Focus on Forex Market Amid UK Leadership Change

  • Pound Turmoil Continues as PM Resigns
  • Treasury Yields Rise Further
  • Choppy Wall Street Trading on Earnings

The main focus of the forex market on Friday again turns to the UK. This comes as the broad instability in the country carried on with Prime Minister Liz Truss announcing her resignation yesterday. The Pound slipped in trading as a result and traders remain focused on the UK. In the US, Treasury yields moved higher again and towards new peaks, for the 10-year in particular. On Wall Street, an unpredictable earnings season rolls on with markets slipping further on Thursday with some big tech names falling. 

Leadership Change Drops Sterling Further

The major news coming on Thursday concerning those forex trading the Pound and the wider economy, was the resignation of UK PM Liz Truss. After just weeks in the job and a record of chaos throughout her short tenure, the embattled leader faced the public yesterday to announce she would be resigning from her position. She will remain in office temporarily while a replacement is found though this is expected to be a very expedited process. 

The entire situation has focused the eyes of the world on the UK yet again just a matter of weeks after a similarly contested departure from Boris Johnson. Among the main critical points from the latest reign was a failed attempt at extreme economic reforms from Truss. These were quickly reversed when the Pound tanked in the market and amid widespread criticism from the opposition and even within her own party. The next question becomes who else is capable of taking office. 

Treasury Yields in the US Continue to Advance

While the turmoil rolls on in the UK with Boris Johnson among the names being suggested for a shock return to office, the Dollar carried on in its own position of strength. This has undoubtedly been aided by the troubles in the United Kingdom and the failures of both the Pound and Euro to take advantage of any opportunities. 

With that in mind, a risk-off mood has been created in the market. This typically leads to a strengthening in safe-haven assets like the US Dollar.  The knock-on impact is also felt in the bond market with these being a very safe play for many traders riding out the storm amid the rising interest rate environment. The US 10-Year is currently trading at another multi-year high of 4.2%. 

Stock Slip as Earnings Session Disappoints

The current earnings reports are continuing to come in this week and have an influence on the markets. On Wall Street, the major indices started the week strongly but have gradually slipped to where they are now looking at a negative week and opening lower again on Friday. 

The combination of factors including increasing economic uncertainty and rising yields have created a difficult environment for stocks, particularly those big tech names. Together with some earnings misses, drop-offs have been seen with Snap the big loser yesterday plunging 25% on lower revenues.

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