Mitsubishi UFJ Analyst: UK Rate Hike Expectations Limit Political Risk Impact on Pound

Mitsubishi UFJ Financial Group analyst Lee Hardman noted in a report that market expectations for a UK interest rate hike this year are limiting the impact of political risks on the British pound. According to Jin10, he stated that signs of further strengthening in UK economic growth momentum at the beginning of the year, coupled with underlying inflationary pressures remaining at an unsettling high level, have fueled rate hike expectations. He added that the Bank of England might keep rates unchanged on Thursday but could signal future rate increases. However, UK Prime Minister Keir Starmer faces a leadership challenge ahead of the local elections on May 7. 'Developments in UK domestic politics could trigger at least a temporary sell-off of the pound in the coming weeks,' Hardman said.