February 13, 2020 / 12:31 PM / 2 months ago

Pound jumps after Sajid Javid resigns

An English ten Pound note is seen in an illustration taken March 16, 2016. REUTERS/Phil Noble/Illustration/File Photo

LONDON (Reuters) - The pound extended gains on Thursday after the resignation of British finance minister Sajid Javid, as investors bet that his replacement would pave the way for a more expansionary budget next month.

Javid turned down the role of finance minister in Prime Minister Boris Johnson’s new cabinet as he was asked to replace all his advisers, according to a source close to Javid.

He will be replaced by Rishi Sunak, previously second in command to the finance minister overseeing public spending.

Extending gains, the pound rose to Thursday's high of $1.3028, up 0.5% on the day. GBP=D3

It also extended its rally against the euro, up 0.6% on the day to 83.37 pence EURGBP=D3, its highest since Dec. 16.

“There has been an ongoing rift for a while between (Johnson advisor Dominic) Cummings and the Chancellor. One of the reasons for the fallout has been reportedly that Javid was much more conservative on fiscal policy,” Jane Foley, an analyst at Rabobank said.

“The implication is that if Cummings is more supportive of the new chancellor then the budget will be more expansionary and the there will be less need for a Bank of England rate cut.”

Reporting by the London Markets Team, writing by Yoruk Bahceli; Editing by Tommy Reggiori Wilkes

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