Defiance
Yesterday’s market was defying one of two things: logic or gravity. Come to think of it, perhaps both. Take cable, GBPUSD, yesterday. The key events beyond minor data releases centred around any chatter from either side of the Iranian conflict and Starmer singing for his supper. Sing he did and tweet the President did, yet rise cable did too. Despite both events almost certainly landing on the destructive side of GBP valuations and risk conditions respectively, the rally was persistent. That was of course until today.
As we quoted yesterday, the betting markets show a significant chance of Starmer being out of a job later this year. Yesterday, following the Prime Minister’s speech, the odds of Starmer’s removal from office in 2026 rose. Sir Kier vowed to defend his position with prediction markets not believing in his ability to do so. By way of an update for the speculators out there, Polymarket quotes prices up two percent higher following Starmer’s speech, offered at a 67% implied probability of Starmer out of the top job come year-end as of the close of the London market yesterday. Today, that clocks in in excess of 85%, the highest since the PM took office.
As we have written, there are Sterling positive elements to Starmer’s removal such as the fact that his replacement is likely to win favour amongst backbenchers and Labour party members by being fiscally expansive. However, the interim uncertainty would undermine such positives, making Sterling’s appreciation yesterday somewhat of a surprise. Trump too stated that the ceasefire with Iran was in a weak state and on life support. This and other such risk appetite-diminishing headlines made the Dollar’s relative underperformance yesterday a surprise. That trend is being rapidly reversed during the market open today.
Discussion and Analysis by Charles Porter
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