MUFG’s Lee Hardman highlights that the pound has strengthened as the EUR/GBP rate has fallen to 0.8700, supported by more hearty UK growth data and BoE Governor Bailey’s reluctance to clearly signal a March rate cut. But tight by-elections in Gorton and Denton pose political risks, and a Labor defeat could weigh on Pound’s results in the miniature term.

The risk of by-elections for the pound’s sentiment

“The pound strengthened earlier this week, with EUR/GBP returning to the 0.8700 level after reaching last week’s high of 0.8752.”

“The UK interest rate market has started to slightly reduce expectations for a rate cut next month, but is still pricing in cuts of around 18 basis points.”

“At the end of this week, the focus will also be on political risks in the UK, which could potentially impact the pound.”

“Labour’s defeat could increase pressure on Keir Starmer as prime minister and deepen Labor’s concerns about its declining popularity ahead of local elections in May.”

“As a result, Labor’s defeat could trigger at least a temporary sell-off in the pound.”

(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)