Pound rises as Rishi Sunak comes to the fore in race for new UK Prime Minister

The pound witnessed a rise against the dollar after former UK prime minister Boris Johnson withdrew from the Tory leadership race, bringing Rishi Sunak to the fore as the top contender to become the next prime minister of the United Kingdom. According to BBC, the sterling was around 0.4% higher at $1.134 during the early hours of Monday, October 24. Furthermore, government borrowing costs experienced a drop with the opening of the markets after the weekend. Previously on October 21, the pound dropped to as low as $1.11, with government borrowing costs on the rise as the political future of the UK remained uncertain. 

The rise of the pound comes after last month’s steep plunge against the dollar, which also came along with government borrowing costs skyrocketing as an aftermath of outgoing Prime Minister Liz Truss’ botched mini-budget. The plan included major tax cuts, something that Sunak warned about during his leadership contest over the summer. The situation only seemed to get mildly better last week, when new Chancellor Jeremy Hunt took a sharp u-turn on Truss’ tax cuts plan, thus somewhat stabilising the financial markets.

Boris Johnson retreats from UK PM race

Meanwhile, Boris Johnson, who claimed that he had been backed by 102 MPs for his comeback, stepped away from the race on Sunday, October 23, and attributed it to his inability to keep the Conservative Party united. “I am afraid the best thing is that I do not allow my nomination to go forward and commit my support to whoever succeeds. I believe I have much to offer but I am afraid that this is simply not the right time,” Johnson said.

“And though I have reached out to both Rishi and Penny — because I hoped that we could come together in the national interest — we have sadly not been able to work out a way of doing this,” he added.

His withdrawal has now left former chancellor Rishi Sunak as the only prime ministerial candidate who has been backed by over 100 Tory MPs, which is a prerequisite to join the shortlist for the UK PM race. Sunak’s contender is Commons Leader Penny Mordaunt, who is yet to secure 100 backers. 

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