The View Beyond: What does the political reset in the UK mean for sterling and UK bonds?

With the UK preparing for a new phase of political leadership under the Labour Party's Andy Burnham, investors are watching closely for signals that could impact sterling and UK bonds. Despite headline changes at the top, market volatility has remained subdued. What’s behind the calm, and what should investors expect next?In this episode of Julius Baer’s Moving Markets: The View Beyond, Ayako Lehmann is joined by David Meier, Chief Currency Strategist, and Afonso Borges, Fixed Income Research Analyst, to examine the implications of the UK’s political reset for currency and fixed income markets. The discussion covers why sterling has remained resilient despite leadership changes, the lessons learned from past fiscal policy missteps, and the structural factors shaping the UK’s economic outlook. The conversation also explores the drivers of UK gilt yields, the impact of oil prices and inflation expectations, and the outlook for Bank of England policy. Finally, the team discusses positioning in UK bonds, the relative appeal of UK assets, and the case for hedging FX risk.(00:00) - Introduction (01:17) - Why has sterling remained calm amid political change? (03:19) - Lessons from past fiscal episodes and the risk of a repeat (04:20) - The new prime minister’s room for manoeuvre (06:19) - Structural constraints and economic outlook for the UK (07:25) - Oil prices, inflation pass-through, and UK gilt yields (10:14) - Positioning on the UK yield curve (10:56) - Bank of England policy outlook (13:22) - Implications for sterling versus major currencies (16:35) - Key factors for UK bond investors (20:30) - FX hedging and international investor considerations (21:32) - UK equities in the current environment (23:01) - Closing remarks and legal information Would you like to support this show? Please leave us a review and star rating on Apple Podcasts, Spotify or wherever you get your podcasts.