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Funding worries pressure sterling as UK cabinet and fiscal plans draw scrutiny

Rabobank said 10-year gilt yields are above 5% and called the pound the weakest G10 currency on a one-day view as markets await how PM Burnham will finance his agenda.

Reported · Written up by our desk · Major Pairs

Rabobank’s Senior FX Strategist Jane Foley said UK markets have reacted with anxiety to PM Burnham’s newly announced cabinet and early fiscal plans, pointing to funding uncertainty and the sensitivity of UK debt to perceived negative news.

Foley noted that 10-year gilt yields are trading above 5% and that the British pound is the weakest performing G10 currency over a one-day view, adding that investors are still waiting to understand how Burnham plans to fund his agenda.

She said Burnham has indicated he will use “flexibility” within fiscal rules and that a detailed 10-year plan will be announced later this year, while near-term measures to ease cost-of-living pressures include cutting VAT on household electricity bills starting in October.

Rabobank also highlighted that the UK has a low savings ratio and a large current account deficit, factors that can heighten debt-market sensitivity. It further argued that the early market reaction could shorten Burnham’s “honeymoon period,” with EUR/GBP seen rising over a three-month view and potential dips in GBP/USD toward the 1.32 area.

Latest closeGBP/USD 1.348 ▼0.5%

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