Back to Markets
Forex▲ Bullish
Pound Sterling and FTSE Defy Political Turmoil
Sterling and the FTSE rose after Starmer resigned, with traders betting on policy continuity. The pound recovered early losses as the market looked past political uncertainty.
Continue with
Pound Sterling climbed against the euro and the US dollar on Tuesday, recovering from early losses after Prime Minister Keir Starmer resigned. The FTSE 100 also moved higher.
Traders said the gains reflected a market looking past the immediate political uncertainty. With a new Labour leader expected to maintain broadly similar fiscal and regulatory direction, the risk premium embedded in sterling has narrowed. That has supported demand for UK gilts, reinforcing the positive tone for equities.
The resignation removes a source of political risk that had weighed on UK assets for weeks. Sterling had been under pressure amid leadership speculation, while the FTSE had lagged European peers. The recovery Tuesday erased those discounts, several currency strategists said.
Attention now shifts to the timeline for the Labour leadership vote. The process is expected to take several weeks, during which policy continuity is assumed. That assumption will be tested when candidates outline their economic platforms.
The next Bank of England decision also looms as a potential catalyst. A rate cut in June would widen the yield gap with the US; a hold would protect sterling's yield advantage. Traders said the pound's reaction to the resignation suggests the market is leaning toward stability rather than a policy shift.