UK Pound, Gilts Recover as Reeves Backed Amid Market Volatility

The British Pound and UK government bonds (gilts) rebounded after Prime Minister Keir Starmer publicly reaffirmed his support for Chancellor Rachel Reeves, quelling market fears about her potential removal. This intervention followed a sharp market selloff caused by speculation and Reeves's visibly upset demeanor during Prime Minister's Questions, which had spooked investors and led to rising gilt yields and a weaker pound. Despite the recovery, market nervousness persists regarding the UK government's fiscal stability and economic outlook, with added risk premiums on gilts reflecting ongoing uncertainty. UK private sector activity showed stronger growth than initially estimated, providing some positive economic data, though the Eurozone's modest PMI growth left the Euro largely unchanged. UK stocks experienced mixed movements, including pressure on rate-sensitive sectors, while US markets showed gains, highlighted by strong employment data influencing currency dynamics. Additionally, NS&I announced new Junior ISA rates and fixed-bond offerings, with interest rates competitive compared to other market options, signaling ongoing shifts in savings products amid the broader economic context.