Sterling rises on Burnham succession bets in UK markets

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Sterling rises on Burnham succession

Highlights

Sterling gains with the euro falling to 86.03 pence, its lowest since August 2025, as investors anticipate reduced UK political uncertainty from a likely Burnham government.
Former Manchester mayor Andy Burnham is favored for prime minister after Darren Jones withdraws and backs him, with Wes Streeting tipped for finance minister if Burnham succeeds.
The pound remains subdued against the dollar at $1.319, sliding 2% this month, as markets price in 38 basis points of expected Fed hikes versus 24 for the Bank of England.

Political succession supports sterling trading

As reported by Reuters, sterling gains against the euro on Wednesday as investors focus on the likely shape of a Burnham-led government and the prospect of reduced political uncertainty in the UK. The euro falls to 86.03 pence overnight, its lowest level since August 2025, and is last down 0.1% against the pound.

Burnham appears set for a clearer path to becoming the UK's seventh prime minister in 10 years after minister Darren Jones says he will not run for the Labour leadership and backs the former Manchester mayor. Current UK finance minister Rachel Reeves is likely to leave her role if Burnham becomes prime minister, media reports say, with former health secretary Wes Streeting among the figures tipped for the post.

Nick Rees, head of macro analysis at Monex Europe, says obstacles to a Burnham coronation are gradually being removed, giving sterling support at the margin. He adds that Streeting's emergence as a favorite for the finance role is also likely to be helping the currency, although he cautions that economic conditions remain difficult.

Dollar strength limits broader pound gains

JPMorgan strategists say on Monday that the fading of political uncertainty, with Burnham likely to become prime minister without a contest, allows more sterling-positive themes such as resilient growth to come into view. Even so, the pound's advance is more limited against the dollar, where global rate expectations continue to dominate trading.

Sterling is last down 0.1% against the dollar at $1.319, while the euro falls 0.2%. Despite its firmer performance against the euro, the pound is down roughly 2% against the dollar this month as traders increase bets on Federal Reserve rate hikes amid stronger U.S. inflation pressures and a solid American economy.

Markets are last pricing in about 38 basis points of Federal Reserve rate increases this year, compared with 24 basis points for the Bank of England. That gap is boosting the relative appeal of the dollar and tempering the pound's gains outside the euro cross.

In our earlier article on Darren Jones backing Andy Burnham’s leadership bid and fiscal approach, we explained how Burnham sought to reassure markets by keeping any extra borrowing limited and tied to specific investment projects. We also noted that investors were watching closely for more detail on his economic plans, including the likelihood of changes to key finance roles and a greater emphasis on devolution-led growth.

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