HSBC: UK Leadership Turmoil and Weaker Carry Weigh on Sterling

HSBC has issued a note arguing that the British Pound is more vulnerable to downside pressure in the current environment. The bank cites two key factors: the resignation of Prime Minister Starmer, which has triggered leadership turmoil within the UK government, and a deterioration in the carry trade appeal of sterling.

According to HSBC, the political upheaval adds uncertainty to the UK's fiscal and economic outlook, while the weaker carry reduces the attractiveness of holding long sterling positions. The combination leaves the currency exposed to further losses in the near term.