𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The pound has swung back higher to erase early losses on Monday morning after Sir Keir Starmer confirmed his plan to step down.

Sterling was up 0.05% at 1.324 US dollars in morning trading, having been around 0.3% lower shortly before the departing Prime Minister’s speech.

It was meanwhile up 0.07% at 1.154 against the euro.

The pound has already lost around 3% since February as Sir Keir’s leadership has come under increasing threat from Labour party challengers.

It comes as Andy Burnham – the former ​Greater Manchester mayor – is due to make his return to Westminster on Monday, having won the Makerfield by-election last week, paving the way for him to mount a leadership bid.

Financial markets were otherwise in wait-and-see mode, with the FTSE 100 Index down remaining just over five points at 10,357.97.

UK Government bond yields – which will also be watched closely for any reaction to a change at the top of Government – were steady, with the 10-year yield flat at 4.845%.

The yield had been higher prior to the announcement. Gilt yields move counter to the value of the bonds, which means their prices fall when yields rise.

Analysts have said gilt yields, while having recovered from levels seen at the worst of the Iran conflict, remain higher than international peers.

Chris Beauchamp, chief market analyst UK at investing and trading platform IG: “While the UK now has to wait to see who fancies their chances in the leadership election, the strong possibility that Burnham is the sole candidate has boosted sterling back above 1.32 dollars.

“In addition, Starmer’s decision not to fight in any contest further reinforces the coronation narrative, as the party looks to unite behind a leader and get back to proving their worth to govern.”

Sir Keir also laid out his potential timeframe for departure, with nominations for a new leader set to open on July 9.

The Prime Minister said he would ask Labour’s ruling National Executive Committee (NEC) to set out a timetable that would see a new leader in place by the time Parliament returns from its summer recess on September 1.

Traders are therefore preparing for further volatility as they await more details over Andy Burnham’s potential policy stance and whether he may face opposition in the leadership process.

Joe Nellis, economic adviser at MHA, said: “Investors are now focusing on what an Andy Burnham premiership will look like.

“The volatility in the market reflects that perhaps not even Mr Burnham knows what this looks like.”