FX.co ★ Pound Cuts Gains

The British pound surrendered earlier gains to trade below $1.34, its weakest level in a week, as investors continued to digest the UK’s shifting political landscape. Newly appointed Prime Minister Andy Burnham, who took office on Monday, unexpectedly named former Defence Secretary John Healey as chancellor. Though Healey had not been seen as a leading contender, his appointment has strengthened expectations of increased defence spending. In an effort to reassure markets, Burnham and Healey underlined their commitment to fiscal discipline, following signs that the prime minister was retreating from plans to raise the personal income tax allowance. On the economic front, ONS data showed UK public sector borrowing came in at £16 billion in June, roughly one-third lower than a year earlier and below market forecasts. Investors also monitored developments in the Middle East and the resulting rise in oil prices.