The pound was stable on Friday morning as investors digested a decisive Labour victory in the general election and unions said it was time to “repair and rebuild Britain”.
Markets had widely priced in a Labour landslide and Keir Starmer’s key message that he would seek to restore stability, drive economic growth and take a fiscally responsible approach to government.
The pound was up slightly against the dollar and the euro at almost $1.28 and €1.18 on Friday morning. Sterling is the strongest performing major currency against the dollar this year. Government borrowing costs remained roughly unchanged.
Labour’s election victory comes against a backdrop of an improving economy. Inflation has returned to the government’s 2% target, after a prolonged period of soaring price rises and a peak inflation rate of 11.1% in October 2022. That was the highest level in 41 years.
The economy has recovered from a shallow recession at the end of 2023 and grew by 0.7% in the first quarter of the 2024, in the latest official data.
As inflation comes down, the Bank of England is expected to start cutting interest rates, possibly as soon as August, in a move that will provide relief and hope for households facing sharply higher mortgage costs.
Paul Nowak, the TUC general secretary, said: “After 14 years of national decline this is a historic opportunity to repair and rebuild Britain.
“The trade union movement stands ready to work with this new government to deliver the change working families desperately need.”
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Kathleen Brooks, the research director at the brokerage XTB, said investor focus would shift to what Labour does in the early days of power.
“The focus now will quickly shift to Sir Keir Starmer’s first 100 days in office, and how he lays out his economic plans to boost growth at the same time as improving public services.”