- Johnson to resign later on Thursday - source
- Sterling climbs 0.5% vs dlr, 0.3% vs euro
- Markets had priced in his departure already
- Economic drivers far more important for pound
LONDON, July 7 (Reuters) - Sterling enjoyed a small bounce on Thursday after reports that British Prime Minister Boris Johnson would shortlyresign, with traders welcoming the prospect of reduced political uncertainty.
The gains versus the dollar and the euro were measured, however, as a stream of ministerial resignations this week had made Johnson's departure almost a certainty and largely priced in by markets. UK assets have been notably calm as a collapse in support engulfed Johnson this week, with the deteriorating global economic backdrop viewed as far more important.
Against the dollar, the pound rose to $1.1994 by 0809 GMT, up 0.6% at the day's high, from $1.1938 , before news broke that Johnson would be resigning.
By 0915 GMT sterling was at $1.1968, holding firmer on the day. The pound had hit a March 2020 low of $1.1887 on Wednesday.
Versus the euro, sterling climbed to 85.11 pence, a three-week high .
"We can expect to see some relief being priced into the UK currency as more details of Johnson’s plan to step down are announced. Financial markets prefer certainty, and this situation is no different," said Mike Owens, Global Sales Trader at Saxo Markets.
He pointing out, however, that the strong dollar had been a much bigger driver of the pound recently than the political uncertainty.
A government source told Reuters that Johnson would announce his resignation as prime minister later on Thursdayfollowing media reports that he would step down.
Sterling has been floored to two-year lows versus the dollar below $1.19 this week, although analysts say concerns about the health of economies including Britain's have been a far bigger cause of the selling than the political drama in Westminster.
Against the euro, the pound has held up far better. Europe's single currency has borne the brunt of investor concerns about the risk of recession and the economic fallout from soaring natural gas prices.
"If you look at where the value of the pound at these cheaper levels, we would expect it to go higher from here," said Gerard Fitzpatrick, global head of fixed income at Russell Investments, citing reduced political uncertainty.
Reporting by Tommy Reggiori Wilkes and Dhara Ranasinghe; Editing by Saikat Chatterjee and Mark Heinrich
Source: Reuters