GBP outperforms peers as rising real yields and reduced political risks boost investor sentiment ahead of new leadership.
The British pound has emerged as the top-performing major currency in recent weeks, driven by a surge in UK real yields and improved carry trade conditions. Higher yields have offset concerns over political risks, making sterling more attractive to investors amid low FX volatility.
Markets have reassessed fiscal and political risks following the appointment of Andy Burnham as prime minister, anticipating a pro-business and fiscally responsible stance. Earlier worries about instability have eased, though analysts caution much of the positive news may already be priced in.
Despite strong gains, further upside for the pound could be limited as valuations reflect reduced uncertainty. The currency’s resilience contrasts with broader energy price pressures, underscoring its relative strength in current conditions.