The British Pound strengthened slightly on Monday as Andy Burnham prepared to succeed Keir Starmer as prime minister, with investors also awaiting confirmation of the country’s next chancellor.
Sterling rose 0.13% against a broadly softer US Dollar to $1.3475 and gained 0.11% against the Euro, which slipped to 84.91 pence.
Meanwhile, the yield on the 10-year UK government bond increased by 1.9 basis points to 4.9724%, while the two-year gilt yield was little changed at 4.3772%.
Following his farewell speech outside 10 Downing Street, Keir Starmer will formally submit his resignation to King Charles. Andy Burnham, the former mayor of Greater Manchester, will then meet the monarch to be officially appointed as the new PM.
Burnham is set to inherit a range of pressing challenges, including a sluggish economy and concerns over fiscal discipline, both of which could have significant implications for financial markets.
Investors have been closely watching Burnham’s choice for chancellor in recent weeks.
UK assets received a boost last week following reports that he is expected to appoint Shabana Mahmood, viewed as a centrist, as finance minister instead of a more left-leaning contender.
The anticipated appointment was interpreted by markets as a sign that the new prime minister is unlikely to pursue the more aggressive spending agenda that some investors had feared.
A considerable amount of optimism already appears to be reflected in UK asset prices at the moment. Markets seem to be pricing in confidence that the Bank of England will successfully bring inflation back to target and that the government will keep the public finances on a sustainable path, Reuters reports.
The Pound posted its third straight weekly gain against the US Dollar last week and extended its winning streak against the Euro to a fourth consecutive week.
Beyond political developments at home, investors will also be focused on a series of key UK economic releases this week, including labour market data, inflation figures and retail sales, which could provide further direction for the currency and broader financial markets.