The sterling rally could be brief, just like Boris Johnson’s premiership

Markets look at the wider picture and post-Brexit, post-pandemic economic policy is still a vacuum

The relief rally in sterling on the resignation of an incompetent prime minister wasn't much to shout about. The pound rose very modestly in the morning and gave back some of the gain in the afternoon. At $1.20-ish against the dollar, the currency still sits at roughly its lowest level since the 2016 referendum, barring a few wild trading days at the start of the pandemic. In an ugly contest with the euro, which is spooked by the threat of rising bond yields among its weaker members, the two currencies are at level pegging.

Markets look at the wider picture: post-Brexit and post-pandemic economic policymaking in the UK is still a vacuum. The economy almost certainly contracted in the second quarter of this year, even before consumers are hit with the next clunking hike in their energy bills in October, an event that will tip inflation over 10% in all likelihood and emphasise how the UK's price squeeze is a notch or two more severe than that of other major economies.