Sterling and bond markets recover after Starmer backs Chancellor Reeves amid policy turmoil.
Following a volatile session, UK government bond yields and the pound have steadied after Prime Minister Keir Starmer publicly reaffirmed his support for Chancellor Rachel Reeves amid speculation of a potential U‑turn on welfare and fiscal tightening.
Earlier, markets reacted nervously after a tense PMQs, where Reeves appeared emotionally strained and her leadership faced doubt.
Concerns centered on the possibility of abandoning welfare reforms and resorting to tax hikes to offset a projected £30 billion deficit. Starmer’s endorsement quelled some investor unease, bringing bond yields down and strengthening sterling—though challenges remain.
Economic data showed the UK service sector is expanding at its fastest pace in ten months, providing a boost to sentiment . However, economists caution that upcoming decisions will be politically sensitive, as options to close the fiscal gap are limited. Any further signals of instability could reverberate through markets again.
Currys’ CEO has warned the government against imposing measures that would hamper retail investment, underscoring broader concerns about the impact of fiscal strategy on economic growth . The balance between political messaging and sound economics will be critical for the Labour government.
I'm Adedayo Obadina
Talksocialtalks
