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British Pound: Fiscal relief supports recovery versus US Dollar – MUFG

FXStreetMay 19, 2026 12:52 PM
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MUFG's Lee Hardman highlights a sharp GBP rebound, with GBP/USD back above 1.3400 as reports suggest Andy Burnham would keep existing United Kingdom (UK) fiscal rules. This apparent fiscal policy u-turn is seen reducing downside risks for Gilts and the Pound, though weaker UK labour data tempers expectations for further Bank of England (BoE) tightening in the near term.

Fiscal reassurance offsets weak labour data

"The pound has staged a strong rebound over the last twenty four hours resulting in cable rising back above the 1.3400-level after hitting a low yesterday at 1.3303."

"The apparent fiscal policy “u-turn” should help to ease downside risks for gilts and the pound in the near-term from heightened political uncertainty in the UK."

"However, the relief rebound for the pound has been dampened this morning by the release of much weaker than expected UK labour market data."

"It is likely that the April figures overstate the underlying scale of labour market weakness, although the report as a whole is consistent with ongoing slack labour market slack."

"It will put a dampener on near-term market expectations for BoE rate hikes in response to the energy price shock."

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

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