Pound rebounds: How have the markets reacted to Rishi Sunak becoming PM?

ITV News Economics editor Joel Hills explains how the markets reacted to Mr Sunak's appointment

The value of the pound has rallied back to its highest levels since before Liz Truss’s mini-budget, as Rishi Sunak was confirmed as the UK's new Prime Minister.

London’s biggest market inched lower on Tuesday after strength in the sterling weighed on the performance of UK multinational firms.

Weakness among London’s banking stocks, driven by an underperformance by HSBC, was also a drag.

However, wider positivity following the confirmation of the former chancellor as prime minister helped the markets regain significant ground from their intraday lows.

The FTSE 100 ended the day down 0.51 points, or 0.01%, at 7,013.48.

The pound was up 1.77% against the dollar at 1.148 and was 0.79% higher against the euro at 1.151 at the close of trading.

Government borrowing costs also improved as yields on long-term gilts - government bonds - eased back due to the improving market confidence.

Joshua Mahoney, senior market analyst at IG, said: “With yields falling into a one-month low, we are seeing markets provide a clear vote of confidence that Sunak will manage to avoid the kind of missteps taken by his predecessor.

“Sunak’s appearance at Downing Street had a tangible effect on the pound today, which currently stands as the best performing of the major currencies over the past 24 hours.

“Unfortunately for the FTSE 100, its inverse correlation with the pound means that it stands as the one market in the red.”

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