Voters in the Greater Manchester constituency of Makerfield head to the ballot box on Thursday, in a politically significant by-election that could spark volatility in the pound.
At the time of writing, the pound is mixed. GBP/EUR is currently down on the day but remains above yesterday’s ten-day low. GBP/USD is gaining ground but is down from yesterday’s ten-day high.
Why is the Makerfield by-election so important?
The by-election could have far-reaching implications for UK politics and the pound.
The Labour candidate, Greater Manchester Mayor Andy Burnham, has said he will run against Prime Minister Keir Starmer for leadership of the party if he wins in Makerfield.
If Burnham loses and Reform’s Robert Kenyon takes the seat, it would be a major political shock and a knock to the Labour Party. Starmer could still face a leadership contest, with former Health Secretary Wes Streeting lined up as a likely challenger.
How could this impact the pound?
We could see heightened volatility in the pound later this week, as the uncertainty filters through into the currency market. Overall, Sterling could weaken, as political instability tends to weigh on GBP.
Adding to the turbulence, the Bank of England (BoE) is set to announce its latest interest rate decision on Thursday, with the pound potentially facing pressure if the BoE leaves rates unchanged and strikes a cautious tone.
Meanwhile, the Federal Reserve decision on Wednesday evening and the latest news around the US-Iran peace deal, due to be signed on Friday, could drive further volatility.
For a deeper look at Thursday's vote, including the longer-term implications for GBP, read our article on how the Makerfield by-election could impact the pound. Meanwhile, our Bank of England preview looks in closer detail at the forecast for GBP amid the BoE decision.
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