06.07.202213:27 Forex Analysis & Reviews: The pound is under pressure due to the resignation of ministers in the UK

As a result of the departure of two prominent UK cabinet members, the value of the pound sterling decreases against the dollar.

Rishi Sunak, the head of the British Ministry of Finance, and Sajid Javid, the Minister of Health, announced their resignations on Tuesday evening. Immediately following this news, the British pound fell by 1.8% to 1.1899, its lowest level since March 2020.

Recent pressure on the pound has been caused by a sharp increase in natural gas prices in Europe and the United Kingdom. It was anticipated that the resulting political uncertainty in the United Kingdom would push inflation to new heights, but as of Tuesday evening, the British pound gained strength and moved slightly higher against the dollar.Today, July 6, the GBP/USD pair attempted to recoup losses by trading in the green zone but subsequently moved back down. By 10:40 London time, the pound's value had decreased by 0.20 percent to 1.1933.

Since the end of 2021, the British pound has been under significant pressure, and it is currently trading near its weakest level since the start of the pandemic. Consequently, from a fundamental and a political standpoint, the GBP is not a currency that should be touched at the moment.

Meanwhile, the dollar is trading near its highest level in 20 years due to investors' anticipation of a global economic slowdown and a rapid increase in gas prices. The cost of electricity in Germany and France for the upcoming year has already reached an all-time high. In negative sentiment, trading participants no longer consider risky currencies, instead opting for more stable assets.

At 11:17 London time, the dollar index, which tracks the dollar's exchange rate against a basket of six other currencies, rose 0.20 percent to 106.75, just above its 20-year high of 106.57, which reached the previous day.

The upcoming release of the minutes from the last meeting of the US Federal Reserve System is of particular interest to the market, as the US regulator raised the interest rate by 75 basis points after the last meeting. This is the most significant increase since 1994.

Nadim Zahavi is the new chief financial officer of the United Kingdom, and Stephen Barclay is the new minister of health. However, such a rapid change in the country's political elites is contributing to an increase in national anxiety and worsening its precarious situation. After the resignations of the Chancellor and the Minister of Health, the next step could be the resignation of the current Prime Minister.

However, the resignations of the Cabinet of Ministers cannot be considered the primary cause of the pound's decline yesterday. The primary reason for the decline in the value of the British pound is the current political instability, which is expected to continue for at least the next few weeks. The Bank of England stated that the economic outlook for Britain and the entire world had deteriorated significantly. Remember that Scotland and Wales, part of the United Kingdom, will provide Ukraine with 100 million pounds in military aid.