By Matthew Boyle
The Pound came under pressure yesterday as political instability in the UK grows and pressure mounts on Kier Starmer to stand down as UK Prime Minister. As markets opened the Pound lost ground across the board – notably against the Euro and Dollar, seeing rates dip by around half a cent against both. It was expected that during yesterday’s cabinet meeting six cabinet ministers, including Home Secretary Shabana Mahmood and Health Secretary Wes Streeting, would tell the Prime Minister to consider his position, effectively launching a challenge to Starmer as PM. However, following the meeting reports suggest that this did not occur, and in fact Cabinet allies of Starmer told journalists the PM would be staying. This saw the Pound regain some of the ground lost in the morning’s trading, enabling it to steal back around a quarter of a cent against the single currency and Greenback. As the news developed throughout the day it was reported over 80 MPs publicly demanded his resignation, which was met a couple of hours later by over 100 MPs signing a letter of support for the struggling PM.
Whilst some are tipping Wes Streeting to make a challenge, others are suggesting the contest may be delayed allowing time for popular Manchester Mayor Andy Burnham to run in a by-election, allowing him to enter Westminster as an MP, and replace Kier Starmer as UK Prime Minister.
What at present seems certain is we are set for a period of uncertainty, not only for UK politics, but for the Pound, and with this uncertainty comes pressure on GBP rates. In the past few days UK bonds have seen a sell-off, due to increasing uncertainty in the market, which will likely impact ongoing inflation figures and as such feed into the long term Bank of England stance towards interest rate changes.
Later today Starmer will introduce his legislative agenda to Parliament in what is known as the King’s Speech, where it is thought he will bring forward the long-awaited defence spending review. This is expected to buy Starmer some breathing space in the battle for the leadership, but don’t expect a lapse in the attack to last for long.
Whilst we do have some data releases of note this week, including UK GDP tomorrow, market focus will remain on how the UK political drama plays out, and of course ongoing conflicts in Iran and Ukraine.
Those with upcoming purchases or payments to make may want to consider removing risk, given GBP>EUR rates are not far off the best they have been in around 8-9 months and GBP>USD rates around a month.
Should you have an upcoming transfer to make speak to your Consultant today for some friendly guidance on how you can make your money go further.
Wednesday
13.30 USD US Producer Price Index
20.15 EUR ECB President Lagarde Speech
Thursday
07.00 GBP UK GDP data
10.15 EUR ECB President Lagarde Speech
13.15 USD US Retail sales and Jobless data
Friday
13.30 USD US Industrial production