The British pound held near its highest levels in a year after reports reinforced expectations that Prime Minister‑designate Andy Burnham will appoint Home Secretary Shabana Mahmood as Chancellor when he unveils his cabinet next week. Although Burnham’s team has not confirmed the appointment, multiple sources say Mahmood is now the clear favourite for the Treasury role, and investors view her as a more market‑friendly choice than some previously discussed candidates. GBP/USD climbed above $1.3535 while GBP/EUR traded close to €1.1810, leaving the pound among the day’s strongest‑performing major currencies.

Market participants believe Mahmood would pursue a fiscally disciplined approach while working with the Bank of England to maintain financial stability. Attention is already turning to the government’s first Autumn Budget after Burnham acknowledged that difficult fiscal decisions lie ahead and refused to rule out tax increases if required to keep public finances sustainable. While the Chancellor appointment remains unofficial until Burnham formally enters Downing Street, the latest reports have helped maintain confidence in UK assets, supporting both sterling and government bonds. Investors will now focus on the full cabinet announcement and any early indications of the new government’s economic priorities.

The reports also prompted a rally in UK government bonds, with gilt yields easing as investors reduced the political risk premium attached to UK assets. Sterling’s strength was supported by resilient UK economic data and expectations that the Bank of England may need to keep monetary policy restrictive for longer if inflation remains persistent. Against the euro, the pound rose to its strongest levels in around a one‑year high, while also advancing against the US dollar and most other G10 currencies.