Pound falls on Burnham’s first full day

Britain’s new prime minister, Andy Burnham, has only been in Number 10 for a matter of hours, but he is already getting a sense of the challenges ahead. Sterling fell to its weakest against the US dollar and euro in a week as more proposed government spending unnerved currency markets.

On balance, the £850mn pledged to cut VAT on winter energy payments – worth about £45 a year to the average household – looks like a drop in the ocean. The pound still fell on Tuesday as investors waited anxiously for concrete signals that the government would not run up against its own fiscal rules in attempting to alleviate the cost of living.

This morning’s June inflation data showed that prices were at least moving in the right direction. Headline consumer price inflation (CPI) fell by more than expected to 2.6%, the lowest since March 2025, although higher oil and gas prices this month might mean that proves to be a flash in the pan.

Sterling was stable after the data arrived, indicating it hadn’t done much to change the Bank of England’s interest rate outlook. The BoE is widely expected to keep rates on hold until after summer when it meets in eight days’ time, with inflation expected to pick up should the conflict in the Middle East drag on and start affecting fertiliser and food costs.

The bad news is that the diplomatic situation didn’t improve yesterday. Despite attempts to restart negotiations, oil prices jumped back above $90 to the barrel as President Trump threatened the Houthi group, which announced it would blockade Saudi Arabian ports.

If one conflict wasn’t enough, Donald Trump reignited the trade war by imposing a 50% tariff on a host of Canadian goods protected during last year’s wrangling. If you don’t have interest in wine, hockey sticks or fishing rods, this next part will provide plenty to groan about. Yesterday, White House officials suggested they were readying another round of tariffs on several other economies.