It’s taken the best part of a month, but the pound has now all but recovered the ground it lost after the Makerfield by-election, the vote that ultimately cost Sir Keir Starmer his job. Against the euro, the pound has strengthened to its best since last June in recent days.
It was therefore unfortunate timing for the embattled Reform leader Nigel Farage to announce he was standing down as MP for Clacton, triggering a by-election he framed as ‘people v establishment’. The British people are no doubt getting rather weary of all these by-elections. All of the other major parties declared they would not field an opposition candidate in an effort to pressure Farage over worsening allegations about the sources of his funding.
Reform have long been seen as the greatest threat to Labour come the next general election. As we head toward the sharp end of the leadership campaign, gambling that the pound will retain its present strength could see the value of your budget shrink in no time at all. Of course, you could also take advantage of this morning’s strength by using a forward contract to lock in your rate. That would mean you don’t have to gamble on the dice in the currency casino landing in your favour.
While the pound has done well, borrowing costs have been on the rise in the past couple of days. The prospect of more political uncertainty pushed those costs even higher on Tuesday, squeezing any spending room Britain’s next prime minister will have upon entering Downing Street.
On a day of big political news, France’s far-right figurehead Marine Le Pen was cleared to run for president next year, having previously been barred for embezzlement. There are a few strings attached, though. The judges stipulated that Le Pen must wear an electronic tracking bracelet throughout the campaign, a term that she forcefully rejected.
Holidaymakers jetting off to Europe this summer might be glad to the hear the European Union’s plans to roll out its online pre-authorisation system will be postponed. That follows a bungled effort to implement the separate electronic border checks, which have caused delays and frustration at the start of peak season.
GBP: UK debt unsustainable, OBR says
UK public finances will reach unsustainable levels by the end of the next decade, the Office for Budget Responsibility (OBR) warned yesterday. In what was a pretty dire assessment, analysts said the ballooning cost of pensions and healthcare, as well as the need to invest in defence, would see Britain’s debt-to-GDP ratio hit dangerous heights in around ten years’ time.GBP/USD: the past year
EUR: Uncertainty creates stalemate
The euro stabilised on Tuesday as investors sought clarity around the European Central Bank’s next move. That wasn’t forthcoming, certainly not from the ECB’s Pierre Wunsch, who rather unhelpfully highlighted both upside and downside risks to inflation.GBP/EUR: the past year
USD: Minutes to midnight
Wednesday’s big event for the US dollar will come after the European close with the first FOMC minutes of the Kevin Warsh era. The US dollar strengthened against a basket of its main rivals yesterday. The first hints of labour market weakness haven’t shaken the widespread view that the Fed will leave rates on hold for the time being.USD/GBP: the past year
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