Bearish Pound Bets Increase as PM Starmer Teeters

Summary

Paul Jackson, strategist at Invesco Asset Management, says he likes UK assets overall despite political uncertainty. He is overweight UK equities, UK gilts, and UK investment grade credit, expects the Bank of England to cut rates three times this year to 3%, and sees sterling appreciating modestly against the dollar. He flags the risk that a removal or threatened removal of Chancellor Rachel Reeves could push gilt yields higher and weaken sterling, but expects political noise to fade and monetary policy to dominate.

• Paul Jackson of Invesco says he likes UK assets as a whole.
• He is overweight UK equities, UK gilts, and UK investment grade credit.
• He expects the Bank of England to cut rates three times this year to 3%.
• He views gilt yields as relatively generous versus other developed markets and the US.
• He expects sterling to appreciate a bit against the dollar over the year, partly on dollar weakness.
• He sees a key risk in UK politics if Chancellor Rachel Reeves is removed or threatened with removal.
• He expects political noise to be short-lived and monetary policy to dominate markets.