Hard to See Burnham Trade Being Pound-Friendly, SocGen Says

Summary

Kit Juckes, chief FX strategist at Societe Generale, discusses the outlook for this week's UK by-election and the potential market impact of Andy Burnham's leadership bid. He argues the Burnham trade is unlikely to be sterling-friendly in week one, with positioning already heavily short, limiting any potential pound rally. A potential Reform Party win would be a surprise but not necessarily a negative for sterling.

• Burnham trade sentiment is wait-and-see for sterling.
• Knee-jerk long sterling is unwarranted given Burnham policy uncertainty.
• Heavy short positioning historically supports sterling but likely keeps it rangebound.
• Reform Party win seen as unlikely but not necessarily sterling-negative.
• Any chancellor change is not expected to prove sterling-positive in the near term.