Starmer faces pivotal day as calls to resign mount

Sir Keir Starmer finds himself in a battle to rescue his premiership this morning. Yesterday’s address from Downing Street, a mea culpa moment that saw the prime minister acknowledge frustrations with his performance, failed to stop the flood of Labour MPs calling for his resignation, a list that reportedly tops 70 names as of this morning.

At least two cabinet ministers are said to have joined backbenchers in urging the PM to outline a timetable for his departure. That decision is likely to hinge around a crunch cabinet meeting in Whitehall this morning. The pound weakened this morning and could have further to fall should Starmer decide to step aside.

The possibility that the UK will soon have its seventh prime minster since the Brexit referendum will set the agenda for the pound this week, even with Friday’s GDP report for the first three months of the year.

Sterling strengthened against both the euro and the US dollar on Monday, largely a result of mounting pressure in the bond market, where scepticism of Starmer’s chances of survival was rife. Yields climbed again on Monday, making the cost of government debt more expensive. Yields move inversely to prices.

If the prime minister was minded to console himself through economics, he will at least have been cheered to hear that house prices are now finally close to where they were in real terms prior to the financial crisis. Research from Deutsche Bank found that prices in both London and the rest of the UK had fallen in line with pre-crash levels.

However, S&P Global’s UK jobs report provided a reminder of the present challenges. Employers are still deferring hiring decisions amid uncertainty in the Middle East, according to analysts, with wage growth and vacancies lower than usual.

Away from the UK, Donald Trump took to social media to condemn Iran’s response to his peace proposal as “unacceptable”. The key brent crude oil benchmark climbed by around 3% on Monday as shipping traffic remains stalled and peace looks some distance away.

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GBP: The wrong kind of support

The pound started the week well against both the euro and the US dollar, but anyone rushing in to buy should beware the reasons for this. At the moment, this is the result of a technical, almost artificial inflation in bond yields. If that bubble were to burst, it could get very messy indeed.

GBP/USD: the past year               

EUR: Gradual recovery

The euro has had a tough time of it against the pound lately, but it has fared better against the US dollar after slipping to a nine-month low back in March. This morning’s German consumer report is the highlight of an otherwise quiet week when it comes to data.

GBP/EUR: the past year

USD: Modest boost for housing

Sales of existing homes fell to a seven-month low in March and there was only a modest improvement in April’s data, which arrive yesterday afternoon. Still, the National Association of Realtors’ analysis highlighted the improvement in home affordability as income growth continues to outpace price increases.

EUR/USD: the past year