Burnham picks Mahmood, whilst UK GDP beats

At one point, odds aggregators had Ed Miliband at a 68% chance of becoming Chancellor by the end of this week, only for Burnham to reluctantly appoint the more fiscally stayed Shabana Mahmood. A relief rally of 1.44% commenced in GBPUSD as concern regarding the UK’s future fiscal stability melted away. Quite the coup by Burnham, who also has been gifted a very rare beat in UK GDP, printing at 0.8% following a revision for the three months ending in May.

Naturally, UK GDP figures are suffering from a lack of credibility with strong beats always materialising in the first half of the year only to be trailed off by near 0 levels of growth in the second half.

With the Fed seeming more reluctant to travel the hawk’s path and the ECB taking a similar stance, the BoE’s stayed attitude isn’t hurting the Pound as badly as it used to.

Still, there is not a real abundance of reasons to be overly bullish Sterling in the medium term, the energy price cap will continue to flatten out CPI increases and the BoE is still concerned about the UK labour market. The British economy has added, net, -155,000 jobs since November of 2024, not exactly an economy straining at its slips.

Sarah Breedon, deputy Governor of the BoE, said today that the softness within the UK economy cuts the risk of a spike in CPI. There is very little the Pound can do to escape being enveloped by broad Dollar movements, especially given the clarity in the BoE’s medium term outlook.