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Pound steadies after UK fiscal rule flexibility and new chancellor

ING said 10-year gilts underperformed and sterling initially reacted cautiously, before recovering on stronger jobs data.

Reported · Written up by our desk · Major Pairs

ING’s Francesco Pesole said British markets saw turbulence after the new UK prime minister, Andy Burnham, signalled flexibility within the fiscal rules and appointed John Healey as chancellor of the exchequer.

According to FXStreet, the initial reaction in sterling was limited, but 10-year gilts materially underperformed other European bonds following Burnham’s comments, reflecting a negative, though contained, response for the currency.

FXStreet also cited ING’s view that while sterling later recovered, full momentum would likely require stabilization in the bond market, especially as attention turns to how the bond market interprets the chancellor appointment.

ING further argued that Healey is unlikely to be seen as materially different from a previously favoured frontrunner, Shabana Mahmood, with expectations that Burnham will drive economic policymaking and use appointments aligned with that approach.

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