The first week of Keir Starmer as UK Prime Minister is being closely watched by the markets, according to FX analyst Francesco Pesole from ING. The election day did not bring any significant movements for the sterling and gilts.
Currently, the focus is on the Bank of England (BoE) speakers. Pesole mentions that the fiscal prospects may not have an immediate impact on the pound. Instead, factors such as developments in French politics, US macroeconomics, and BoE rate expectations will continue to be the main drivers for Pound Sterling (GBP).
After a quiet period before the election, BoE officials are scheduled to start speaking publicly again. Jonathan Haskel, an external member known for his hawkish views, has already delivered his remarks. This week, Huw Pill and Catherine Mann, both considered hawks, are set to speak on Wednesday.
Looking ahead, the UK data calendar includes May GDP data on Thursday, but it is relatively quiet until next week’s June inflation report. Pesole sees some downside risks for GBP/USD this week due to the spillover from EU political risk. However, this also means that the possibility of EUR/GBP rising steadily above 0.8500 has been pushed back.
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