UK fiscal policy details delayed until October may limit sterling and gilt relief rallies, analysts say.
The British Pound and gilts have stabilized after Prime Minister Andy Burnham appointed John Healey as Chancellor and reaffirmed commitment to fiscal rules. However, specifics on spending plans remain unclear until the October budget, creating uncertainty.
UK labor market data showed the unemployment rate unchanged at 4.9% in May, with the vacancies-to-unemployment ratio at 0.4, below the equilibrium level of 0.50. This indicates persistent labor market slack, which may weigh on monetary policy expectations.
Markets currently price in a 25bps Bank of England rate hike to 4.00% in November and 60bps of tightening over the next year, though fiscal uncertainty could prompt dovish repricing.