Sales & Trading

Research evidence excerpt

Sales & Trading

eet which confirmed his resignation

and ‘wished him well’ but No.10 was at pains to stress nothing has been decided yet. Still plenty

of question marks here even if Starmer goes of his own volition; would he step down

immediately or stretch it out until September (preferable to Burnham) and is the support for

Burnham so strong that no other candidate can get the 81 needed to trigger a contest rather than

a coronation? All of these questions however pale into insignificance compared to his choice of

Chancellor when it comes to the chance of a big swing in UK assets; Miliband, Mahmood and

Cooper are in the frame to replace Reeves and it is Miliband that would prove the most

unsettling. He has drawn a fair bit of condemnation in the media and I worry that it might be

because he has the best chance in the minds of insiders but let us see. As mentioned above, we

can all be confident Burnham will be in by September, there is a minor case to be made that a

frictionless path would be better for UK assets as we will not be left with a lame duck PM for a

few months and we might be spared the campaigning to a Labour party that is moving to the

left.

GBP selling picked up in a big way last week – it was the most sold currency by SHFs

accounting for ~70% of net USD purchases and the sector has wiped out over 90% of the

rebuild in length I have been highlighting since mid-May. As such the positioning picture is not

as clean for me here and given the more sensible people Burnham is surrounding himself with

(Hughes, O’Neil, Haldane etc) it feels like the hurdle to seeing a decent move lower in GBP is

high here. I am now square EURGBP and would look to trade the gyrations going forward more

tactically – expectation is we should hear from Starmer this morning.