British Pound: Market calm under Burnham’s cautious agenda – ING

James Smith at ING highlights that UK markets have reacted calmly to Andy Burnham becoming prime minister, with risk premia contained as investors expect no major policy shocks this year. Nonetheless, he flags that ambitious plans on social housing, welfare and tax reform, plus possible changes to fiscal rules or a snap election, could shift perceptions of UK assets over the coming years.

Sterling sentiment and policy uncertainty

"Risk premium in the bond markets looks contained. Most investors I speak to don’t expect him to rock the boat this year, even if there are concerns about the fiscal trajectory further ahead."

"Burnham's bold ambition towards everything from social housing investment to nationalisation is constrained by a commitment to stick to the fiscal rules and not raise the biggest taxes."

"That tentatively points towards a relatively modest Autumn Budget. Expect a focus on policies that are as eye-catching as they are cheap and simple to implement."

"So far, so boring. So how could Burnham surprise markets this autumn?"

"A snap election is still the major wildcard. And markets probably wouldn’t like it."

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