JPMorgan Turns Bullish on Sterling Again as Starmer's Resignation Reduces Political Uncertainty
Alina Collins
After Starmer resigned, JPMorgan immediately reinstated its long-sterling position — the core logic is that fading political risk lets the market refocus on the UK's carry advantage and economic resilience, a clear short-term positive though the fiscal budget remains a medium-term variable.
Why is JPMorgan turning bullish on sterling right now?
Global FX strategist James Nelligan says Starmer's exit "adds a degree of clarity to the political picture."
This means → the market's attention shifts from a political risk premium (the extra return demanded for political instability) back to economic fundamentals and the interest-rate carry.
The trade: go long sterling against an equal-weighted basket of EUR, CHF, and SEK. JPMorgan recommended long GBP/SEK in April, moved to the sidelines pending by-election results, and is now back in.
Why does Burnham reassure Wall Street?
Andy Burnham won the Commons by-election with 54.8% of the vote, then received a public endorsement from former Health Secretary Streeting — making him the frontrunner for PM.
Nelligan notes Burnham "has toned down his stance on fiscal policy." In plain terms = he has not floated an aggressive spending agenda, so Wall Street is willing to mark down the UK's political discount.
Barclays expects a Burnham government to preserve Bank of England independence and the existing fiscal-rules framework — no sharp policy U-turn. Goldman Sachs holds a similar view.
How has the market already reacted?
After the resignation, GBP/USD initially fell 0.4%, then reversed during European trading and broke above 1.3270 to a fresh session high.
This reflects the market's pricing logic: a brief "political-vacuum" scare was quickly overridden by the expectation that the successor is more pragmatic.
Sterling has now pulled away from the post-March low set after last Friday's drop below 1.3170.
Bullish short-term — where is the medium-term risk?
JPMorgan itself flags that when the new government drafts its first budget, fiscal risk premium (deficit risk premium) could rebuild.
This means → what the market ultimately watches is not who becomes PM but how the new budget balances infrastructure investment against fiscal discipline.
If Burnham's government holds the line → UK equities, gilts, and sterling all benefit. If the budget signals deficit expansion → the political discount that just faded will face repricing.
Content is for reference only, not financial advice.