Sterling edged above $1.345 as Andy Burnham prepares to take office as Prime Minister today. Market focus is now firmly on his choice of Chancellor. Reports last week indicating that Shabana Mahmood is the frontrunner have helped reassure investors, easing concerns that the new government might adopt a significantly more expansionary fiscal stance.
At the same time, rising tensions in the Middle East have driven oil prices above $90 per barrel, heightening inflationary pressures and reinforcing expectations that the Bank of England will maintain tighter policy for longer. The US and Iran have engaged in an escalating series of retaliatory strikes, with US forces launching multiple attacks on Iranian targets following the deaths of American service personnel. The longer the conflict continues, the greater the risk that elevated crude prices become embedded.
