British Pound: Leadership change seen contained – DBS

FXStreet Insights Team FXStreet

DBS Group Research economist Philip Wee argues that Sir Keir Starmer’s resignation and the upcoming Labour Party leadership contest should not trigger a repeat of the 2022 UK mini-budget crisis for the British Pound. The report stresses key differences in fiscal approach versus Liz Truss’s unfunded tax cuts and suggests GBP/USD can remain within an established trading range.

Labour leadership risks for Pound seen limited

"Sir Keir Starmer announced his resignation as British Prime Minister and leader of the Labour Party on June 22."

"If front-runner Andy Burnham becomes prime minister, he would steer the Labour Party from Starmer’s political centre towards left-leaning fiscal spending increases. However, don't expect this year's Labour Party leadership contest to mirror the mini-budget crisis that followed the Conservative Party's contest in 2022."

"Unlike the 2022 strategy under former Prime Minister Liz Truss, which triggered a severe Gilt market panic by introducing completely unfunded tax cuts financed through a massive surge in public borrowing, the 2026 Labour framework operates on a strict, pound-for-pound revenue-matching model."

"By prioritizing targeted tax adjustments to fund structural cost reductions, such as transport nationalization, over-aggressive demand-side stimulus, the current transition is designed to work alongside the markets and independent regulators, effectively neutralizing the risk of a sudden, volatile institutional shock."

"Hence, GBP/USD may yet hold that 1.30-1.39 range set after US President Trump’s Liberation Day tariffs."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD extends losses toward 1.3200 after weak UK PMI data

GBP/USD loses further ground toward 1.3200 in the European session on Tuesday. Political uncertainty in the United Kingdom weighs on the British Pound, alongside weak business PMI data for June. Meanwhile, the US Dollar capitalizes on the risk-off mood and hawkish Fed bets ahead of the US PMI release.

EUR/USD stays weak below 1.1450 after German, EU PMI data

EUR/USD struggles to stage a rebound and trades below 1.1450 in the European session on Tuesday, after the data from Germany showed that the Composite PMI declined to 48 in June from 48.8 May, while that from the Eurozone rose to 49.5. Meanwhile, the US Dollar holds the upper hand against the Euro amid risk-off sentiment and a hawkish Fed outlook, leaving the pair on the defensive. Traders now await the US PMI data.

Gold drops to nearly two-week low, seems vulnerable amid Fed hike bets, bullish USD

Gold adds to its Asian session losses, and drops to a nearly two-week low, around the $4,115 region in the last hour amid a bullish US Dollar. Despite positive signals from US-Iran peace talks, widespread skepticism remains toward a final deal. This helps the USD in preserving its recent strong gains to the highest level since May 2025.

Bears cap Solana below $75 as ETF, retail demand wanes

Solana edges below $72 risking a third consecutive day of losses that could erase the 5% gains from Friday. SOL-focused Exchange Traded Funds reflect muted demand from institutional investors following a minor recovery last week. Meanwhile, retail trading activity hints at a bearish positional buildup.

Big day of PMIs ahead

In the euro area, June flash PMIs are released. Most respondents will likely have answered after the US-Iran deal, yet the impact of lower oil prices is unlikely to already show up in activity data. We expect manufacturing to edge down to 50.9 (May: 51.6), while we expect services to see a modest improvement to 48.8 (May: 47.7).

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.