Commerzbank’s Michael Pfister highlights mounting political turmoil in the United Kingdom (UK), with resignations and leadership speculation tightening pressure on Prime Minister Keir Starmer. He sees rising uncertainty over future fiscal policy as negative for the Pound (GBP). Despite recent Pound weakness, Commerzbank believes markets have not fully priced the risks and continues to expect higher EUR/GBP in the coming weeks.

UK political risks seen hurting Pound

"Nevertheless, the noose around Starmer’s neck seems to be slowly tightening."

"The Prime Minister appears severely weakened, and it is questionable whether he can remain in office for much longer."

"The situation is bad for the pound for two reasons."

"Firstly, political uncertainty rarely benefits a currency, and secondly, it is currently unclear what policies the potential successors intend to implement."

"Despite the recent weakness of the pound, we believe that this has not yet been fully reflected in market prices."

"We therefore continue to expect higher EUR/GBP levels in the coming weeks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)