ING’s Chris Turner argues that UK political uncertainty around Prime Minister Keir Starmer, following the resignation of a close ally and scrutiny over a key diplomatic appointment, is adding pressure on Sterling and Gilts. Combined with a dovish Bank of England meeting, ING flags EUR/GBP targets at 0.8740/45, with risk of a move to 0.8800 if Starmer appears likely to step down.

Starmer uncertainty and BoE dovishness hit GBP

“Questions over PM Starmer’s judgement are likely to remain as the decision to appoint Mandelson faces further official scrutiny, and the Labour Party also faces a political reckoning at a by-election in late February and local elections in May.”

“Expect pressure to remain on both sterling and Gilts as the market speculates over a change of personnel at numbers 10 and 11 Downing Street.”

“Combined with a dovish twist at last week’s Bank of England meeting, sterling is under pressure.”

“0.8740/45 looks the initial target for EUR/GBP, with the risk to 0.8800 if it were to appear as though Starmer will step down.”

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