BNY’s Geoff Yu highlights that Sir Keir Starmer’s resignation and the likely appointment of Andy Burnham as Prime Minister are largely priced into U.K. assets. While higher fiscal impulse is reflected in gilt yields, the bank argues that a sustained improvement in Pound performance hinges on renewed cross-border interest, which may wait for a new Chancellor.

Pound needs cross‑border interest

“The U.K. will have its seventh prime minister in ten years, as Sir Keir Starmer has bowed to the inevitable and resigned from office. The expectation is that new Member of Parliament Andy Burnham will be chosen as Labour leader – and therefore prime minister – unopposed, avoiding a potentially divisive leadership election.”

“Higher fiscal impulse has been factored into gilt yields, but the key trigger for an improvement in GBP will be a return in cross-border interest, which has been lacking since H2 2025. We doubt that cross-border flows will pick up until a new chancellor is appointed.”

“As Starmer’s exit has largely been the market’s base case since the May local elections, the current impact on U.K. assets is likely to be muted. Investors do expect a shift toward higher fiscal impulse, but if the growth strategy is credible and better-executed, we don’t expect much chance of a repeat of the events of 2022.”

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