According to ING’s Francesco Pesole, Andy Burnham’s recent by-election victory positions him as the likely next UK Prime Minister, with betting markets anticipating a leadership transition by late summer [1]. The article notes that the absence of a political risk premium in Pound assets over the past month indicates that investors do not expect significant fiscal disruption from Burnham’s potential premiership [1].
ING maintains a generally bullish stance on EUR/GBP, attributing this to the expectation that the Bank of England will not implement further rate hikes, a view reinforced by a recent uneventful central bank meeting [1]. However, ING highlights that fiscal headlines remain an upside risk for EUR/GBP, as the market’s sensitivity to fiscal developments has been heightened since 2022 [1].
The report also suggests that imminent cabinet resignations could pressure current Prime Minister Keir Starmer to step down, potentially accelerating Burnham’s path to power, though a longer leadership challenge remains possible [1]. Overall, the investor community appears confident that Burnham’s fiscal plans will not unsettle the gilt market, but ING cautions that any negative fiscal news could still impact GBP and gilts [1].
CONCLUSION
ING sees the UK’s political transition as a potential upside risk for EUR/GBP, though current market pricing reflects confidence in fiscal stability under Burnham. The absence of a political risk premium in the Pound suggests limited immediate market concern, but fiscal developments remain a key factor to watch.