ING’s Chris Turner reports that Sterling weakened independently as UK politics took centre stage, with Prime Minister Keir Starmer facing potential leadership challenges from figures like Wes Streeting, Andy Burnham and Angela Rayner. He warns that formal leadership bids, particularly from Burnham, could trigger further Pound losses, though high yields and expected demand in EUR/GBP below 0.8650 provide some support.

Leadership uncertainty and FX reaction

"Sterling finally saw some independent weakness yesterday as Westminster politics moved front and centre. As it stands, Keir Starmer intends to stay on as prime minister and run in any leadership contest against challengers. Those challengers, such as Wes Streeting, Andy Burnham or Angela Rayner, have yet to formally declare themselves in the race."

"Today could prove a day of rest in political manoeuvring, given the state opening of parliament and King Charles delivering Labour's planned legislation over the next term. However, any of those candidates formally launching a leadership bid would probably result in fresh sterling losses – especially any news on Andy Burnham, whose policies are seen threatening the gilt market."

"High yields are probably providing sterling with a little insulation at the moment, but we would expect good demand in EUR/GBP under 0.8650."

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