Pound: Optimism supports growth amid risks – MUFG

The Pound has shown strength, with GBP/USD rising to 1.3683, approaching last year's high. This upward momentum follows stronger than expected UK PMI surveys, indicating improved business confidence. However, political risks remain a concern, particularly surrounding the Labour Party's by-election strategy and potential leadership challenges for Prime Minister Starmer, which could impact the Pound's stability. MUFG Senior Currency Analyst Lee Hardman notes.

Political risks linger despite growth optimism

"The pound’s upward momentum was triggered by the release of the much stronger than expected UK PMI surveys on Friday alongside the broad-based US dollar sell-off."

"We continue to believe that the local elections pose downside risks for the pound, and are not convinced that stronger growth will prevent the BoE from lowering rates further this year if inflation falls back closer to target as we expect."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)