What’s next for GBP?
Those watching Sterling will not have been able to ignore its gravity-defying push higher yesterday. Cable (GBPUSD) experienced its biggest one day move since Q1 2026 amidst broad-based USD weakness and sudden GBP demand. It’s important to note that the backdrop of relative USD weakness this week is creating an environment where FX, including GBP, can outperform. That USD weakness is hanging over from Tuesday’s US CPI print that is likely to limit the Fed’s need to raise interest rates later this month.
So, with the stage set for a possible FX rally, how did Sterling attract the lion’s share to become the best performing G10 currency against the Dollar yesterday? The timing and size of the rally it is consistent with short covering by speculative investors based on political murmurings. With an unopposed Burnham set to win the Labour party’s leadership election today and officially take over from Starmer on Monday, the big question of who would be the next Chancellor of the Exchequer remained unanswered.
That was until a leak to the FT yesterday suggesting the next Chancellor would not be Ed Miliband. Instead the report touted it would be the more fiscally conservative Shabana Mahmoud. One catch: Mahmoud herself, according to the leak, was not even aware of the appointment and to today it remains unconfirmed. With speculative investors heavily short Sterling, this was enough to force significant demand into the Pound at around 15:30 BST yesterday. That brings a precarious GBP to one year highs and cable towards the top of its 5-year range.
Discussion and Analysis by Charles Porter
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