The British pound dropped to its lowest level in two months amid speculation that Keir Starmer is close to announcing his departure from No10. Initially, London shares declined but later recovered, with the market reaction relatively muted as the potential PM’s exit had already been factored in.
Reports suggested that Sir Keir might soon outline a timeline for stepping down, potentially paving the way for Andy Burnham to become the seventh leader of Britain since the Brexit vote a decade ago. The focus remains on the bond market due to the UK’s high borrowing costs and substantial national debt.
The yield on 10-year gilts remained steady at 4.83%, near its highest point since the 2008 financial crisis, while 30-year gilts saw a slight drop to 4.52% in early trading on Monday. Analysts speculate on the impact of Starmer’s departure on the market and question whether Burnham can provide a more dynamic leadership approach.
Deutsche Bank’s Jim Reid noted the significance of a potential PM resignation coinciding with the Brexit vote anniversary, highlighting the challenges faced by UK leaders in today’s Western world. The stock market response has been mild, with the FTSE 100 showing positive gains year-on-year.
Sterling weakened against the US dollar and euro, prompting discussions on Burnham’s fiscal policies and choice of Chancellor. Economists are keen to see if he will adhere to existing fiscal rules.