Sterling Inches Up as UK’s Sunak Reshapes Cabinet with Cameron’s Return
On Monday, the British Pound experienced a slight uptick following Prime Minister Rishi Sunak’s cabinet reshuffle, a move that saw the return of former Prime Minister David Cameron as foreign minister while ousting Interior Minister Suella Braverman.
Market response to the cabinet adjustments was moderate, with analysts emphasising that the short-term trajectory for sterling would pivot more on economic data and the U.S. dollar outlook than the alterations in British politics.
As of the latest trading, Sterling was at $1.2248, marking a 0.2% increase for the day. Against the euro, the pound was positioned at 87.28 pence, also showing a 0.2% uptick.
Simultaneously, benchmark 10-year UK gilt yields experienced a 3 basis points decline at 4.31%, stepping back from the session peak of 4.363%. The FTSE 100 also exhibited a 0.6% rise, hovering near the day’s high.
In the UK, cabinet reshuffles primarily register as domestic political affairs. Investors eyeing UK assets now face a more immediate concern in the form of Wednesday’s release of the consumer price index (CPI) for October. Economists polled by Reuters anticipate a 4.8% year-on-year increase, down from September’s 6.7%.
A 4.8% reading would signify the smallest in two years, reflecting a slower pace or even a decline in the cost of essentials such as energy and food over recent months.
Next on the agenda is Finance Minister Jeremy Hunt’s autumn budget scheduled for Nov. 22. Hunt, who retained his position in Sunak’s reshuffle, emphasised that the autumn statement would concentrate on reducing inflation to stimulate growth, following data revealing that Britain’s economy narrowly avoided a recession in the July-September period but failed to expand.
The reshuffle signifies the latest recalibration for a prime minister trailing the Labour Party significantly ahead of an anticipated election next year. Cameron’s return implies Sunak’s inclination towards introducing more centrist, experienced figures rather than catering to the right-wing faction of his party that supported Braverman.
Despite Suella Braverman’s removal from her governmental role, the impact appears negligible. The FX markets are expected to remain relatively unperturbed by both the reshuffle and the autumn statement, considering Sunak’s likely avoidance of drastic measures. With a general election still on the horizon, the focus for FX markets this week will likely be the UK CPI figures slated for release later today.
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