Image © Pound Sterling Live
Andy Burnham may prove less of a headwind for sterling than investors had feared, according to JPMorgan's trading desk.
The trading desk is separate from the bank's analyst function and sits at the frontline of FX trade here in London, offering a good view of what those actually shifting money are thinking.
The desk says both gilts and the pound proved comfortable with Burnham's Monday speech delivered in Manchester, where he struck a more fiscally disciplined tone than many had expected.
"Fairly positive reaction from gilts and sterling to Burnham’s devolution speech, not too much on expensive endeavours like privatisation for example and more respect indicated for public finances and Britain’s investment credentials," says the desk note.
The view is that the market is also seemingly okay with the idea of an Ed Miliband Chancellor heading up the Treasury. According to Polymarket, Miliband's odds have shot up from 17% on Monday to 63%:
"It does seem like the market is recalibrating how bad Red Ed would actually be given the force of Burnham."
The desk also notes Labour has narrowed the gap with Reform in recent polling. "Momentum feels pretty positive to me as ever since his route to Number 10 took shape, the language of Burnham has really changed and eased worries about his perceived lefty credentials."
That backdrop leaves the desk constructive on sterling.
"With a potential summer of carry around the corner hard to see GBP not continuing to trade well going forward."
Reflecting that view, the desk says it is looking to establish short EUR/GBP positions following month-end market flows, signalling an expectation that sterling can continue to outperform if Burnham maintains his more market-friendly tone.