The pound hit three week highs against a broadly weaker euro after a reshuffle of Britain’s cabinet steadied ongoing political uncertainty that has weighed on sterling in recent months. Amongst the most notable changes was the appointment of pro EU justice secretary David Liddington as the new head of the ruling conservatives. Mr Liddington who had strong connections in EU capitals will move to the Cabinet Office as the prime ministers fixer, responsible for chairing a number of cabinet committees and standing in for her at Prime Ministers Question Time. The former Europe minister will replace Damian Green who was sacked last month over allegations about his personal behaviour. Senior minsters such as Philip Hammond and foreign secretary Boris Johnson all retaining their positions.
The changes are thought to be aimed at giving her government a fresh start following months of infighting, scandals and a poorly judged election which have all pressured the UK currency over the course of 2017. Investors believe that although the changes are likely to alleviate some uncertainty the pound will only be affected in the long run by progress in the Brexit talks or a Bank of England rate hike.
San Francisco Fed President John Williams over the weekend said that the Fed should hike rates three times this year given the strength the already booming economy will get from tax cuts. In an interview on Saturday, the key rate-setter painted a popsitive picture of the US economy and said that he expects it to operate at close to full capacity over the coming few years. Williams also predicted that unemployment will fall by more than forecast to 3.7% this year without creating any significant inflationary pressure. Speaking at a confidence in Philadelphia, Williams said, The U.S. economy will be “in a very positive place two years from now: I think we’ll be at 2 percent inflation and around 4 percent unemployment,”. He added “I‘m not worried about inflation suddenly taking off, something like three rate hikes makes sense to me this year”.