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Pound surges to multi-month highs on reports of UK chancellor switch

GBP/USD pushed through 1.3445 to a two-month high of 1.3556, with the UK rate market fully pricing in additional BoE hikes.

Reported · Written up by our desk · Major Pairs

The British pound has rallied across major currency pairs, reaching multi-month highs versus both the US dollar and the euro, as market participants cite lower UK political risk and stronger-than-expected economic momentum, according to FXStreet.

FXStreet reports that MUFG connects the move to a declining political and fiscal risk premium after speculation that Shabana Mahmood could become chancellor under Prime Minister-in-waiting Andy Burnham. The firm also points to May UK monthly GDP growth of 0.1%, lifting Q2 growth forecasts to 0.3% and supporting expectations for better first-half performance.

As FXStreet notes, the BoE rate outlook has also shifted, with the UK rate market pricing back in additional Bank of England rate hikes over the year ahead. UOB said GBP/USD broke through resistance at 1.3445 to print a fresh two-month high of 1.3556, though it flagged short-term conditions as deeply overbought.

On the euro side, FXStreet says Societe Generale observed EUR/GBP extending its slide after breaking below a head-and-shoulders neckline at 0.8610, with the pair falling into the 0.84 area, its lowest level since June of last year. The coverage also highlighted technical overstretch and thin market conditions, with moves accelerated by hedging and reserve rebalancing flows.

Latest closeGBP/USD 1.354 ▲1.4%

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