Markets taking sanguine view of May 7th local election risks
Markets appear complacent on the risks the UK’s May 7th local elections pose to the sterling exchange rate. Opinion polls point to heavy losses for both Labour and the Conservatives, boosting Reform UK and increasing political uncertainty. Poor results could weaken Keir Starmer’s position and raise fears of less fiscally disciplined policies, particularly if Chancellor Rachel Reeves’ position is undermined.
UK asset prices have been sensitive to political developments, while the public finances remain fragile and deficit‑reduction plans face both execution and political risks. Although sterling appreciated following the Bank of England’s April 30th meeting, investor attention is now likely to shift to the May 7th elections, with the risk that post‑election volatility is being underestimated.
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