GBP: Political uncertainty weighs heavily – BBH

FXStreet Insights Team FXStreet

The British Pound and gilts have declined sharply due to political uncertainty surrounding Prime Minister Keir Starmer's leadership. The Bank of England is expected to hold rates steady at 3.75% amid concerns that a potential change in leadership could lead to more left-leaning fiscal policies, note Brown Brothers Harriman (BBH) analysts.

Political turmoil impacts GBP and gilts

"GBP and gilts plunged driven by UK political uncertainty. Prime Minister Keir Starmer is facing intense leadership speculation over his decision to appoint Peter Mandelson as US ambassador, despite knowing about his connection to Jeffrey Epstein."

"The BOE is widely expected to keep rates on hold at 3.75% after voting 5-4 to cut rates by 25bps at the December 18 meeting. A 7-2 vote split is expected this time around, with staunch doves Swati Dhingra and Alan Taylor favoring a 25bps cut."

"Overall, persistently above target UK inflation suggests the BOE can afford to wait before resuming easing to support weakening labor market conditions."

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

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