British Pound: Political risks cap recovery – BBH
Elias Haddad at Brown Brothers Harriman writes that GBP/USD has bounced after holding above its late-March low, but he sees risks still tilted lower. He cites stronger US growth relative to the UK and an increasingly uncertain UK political backdrop, including potential Labour leadership challenges, as key headwinds for the Pound against the Dollar.
Sterling pressured by politics and growth
"GBP/USD recovered after holding the line above its March 31 low of 1.3159. GBP/USD risks remain skewed to the downside, reflecting a stronger US growth outlook relative to the UK and the murky UK political backdrop."
"Andy Burnham comfortably won yesterday’s Makerfield by-election, clearing a path for his return to parliament and a leadership challenge to Prime Minister Keir Starmer. A Burnham-led Labour government will likely lead to more spending and borrowing, worsening UK fiscal credibility."
"The swaps curve continues to price in a 25bps Bank of England (BOE) rate rise to 4.00% in November. Yesterday, the BOE left the policy rate unchanged at 3.75% for a fourth straight meeting (widely expected) while the hawkish dissent rose in line with consensus."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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