30 June 2026: The market welcomes Burnham’s fiscal rules pledge

Andy Burnham, who is likely to be the UK's next Prime Minister following Keir Starmer's resignation, has set out plans to decentralise power to boost the economy and raise living standards. "I am going to give Britain the circuit breaker it needs by building a more collaborative politics," Burnham says in a speech in Manchester.

Manchesterism is certainly radical. According to its creator, it is nothing less than a 10-year mission to bring “the biggest change in our lifetimes to the way the country is run”, with a council house or flat for all who need one, a reindustrialised and “rewired” British economy, and a “No 10 North” tasked with driving forward wide-ranging constitutional reforms to transform the UK.

He promised the “biggest council house programme since the war”, implying not only the 1.5 million units (private and public) pledged by Sir Keir Starmer but also exceeding the 425,000 peak of annual construction reached in the 1960s. The “biggest rebalancing of power our country has seen”. The audience, predominantly Labour, soft Left and proud of it, loved every word.

The country presumes that Burnham will enter 10 Downing Street as Prime Minister by the end of July. It also presumes that no one is brave (or foolish) enough to challenge him. These “big hitters” (are there any?) on the Cabinet and some who have rejoined the backbenches are jockeying for the juiciest roles under Burnham. It is doubtful that the country has a clear idea of the major thrust of its policies.

Markets welcomed Burnham’s fiscal rules pledge, with clear evidence across FX, gilts, and analyst commentary.

The Bank of England’s Chief Economist has warned fellow policymakers about the risk of becoming “complacent” about the cost of living, while defending his recent calls to hike interest rates.

Huw Pill, a member of the Bank’s Monetary Policy Committee, has voted to increase rates to 4% at its last two meetings.

He was the only member of the nine-person committee to vote that way in April, and was joined by one other member, Megan Greene, in June’s vote.

The decision was fuelled by concerns that inflation was above the 2% target.

Pill told the Press Association that policymakers “should not be complacent” about the current rate of Consumer Prices Index inflation, which threatens to rise as oil and gas prices surge amid the US-Israeli war with Iran.

The CPI rate was 2.8% in April, the same as in March, official figures showed.

He said that in the past, inflation running one percentage point above target would have been seen as “problematic”, adding: “I think it should still be seen as problematic, because our mandate is very clear; inflation at 2% at all times.”

The pound rallied to the top of its current range, climbing to a high of 1.3262 and closing at 1.13256.

Citigroup’s chief US economist, Andrew Hollenhorst, is sticking to a forecast of three Fed rate cuts in 2026, despite the suggestion of a strong June jobs report. He argues that strong jobs data will keep Fed officials hawkishly focused on inflation risks in the near term, but the labour market is likely to soften over the next three months, bringing rate‑cut expectations back into play.

Citi’s baseline is for Quarter‑point cuts in September, October, and December.

Most major Wall Street banks have abandoned their 2026 rate‑cut forecasts after strong job growth (172,000 in May), rising inflation following the oil price spike linked to the Iran conflict, and equity markets hitting record highs.

Citi and Goldman Sachs are now the only large banks still expecting Fed easing this year. Goldman sees one cut in December; Citi sees three.

The current market prediction for the June jobs number is 100k new jobs created. The data will be published on July 10th, given the proximity of the 250th anniversary celebrations.

Texas manufacturing output growth decelerated in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions and a widely used indicator of growth across the country, fell five points to 4.1, suggesting a below-average pace of output expansion.

Other measures of manufacturing activity remained positive but indicated slower demand growth. The capacity utilisation index rose two points to 7.3, while the shipments index was unchanged at 7.1. However, the new orders index fell further, to 2.3 from 6.4.

The Supreme Court dealt President Donald Trump a setback on Monday, rejecting his attempt to fire Federal Reserve Board member Lisa Cook, while, in a separate case, giving him a freer hand to exert control over other hitherto independent federal agencies.

The two decisions, issued at the same time by Chief Justice John Roberts, together marked another example of the conservative-majority court pushing back on one aspect of Trump’s broad exertion of executive power while giving him the green light on another.

Though Trump may not fire Cook for now, the court allowed him to remove a member of the Federal Trade Commission, Rebecca Kelly Slaughter. In the latter case, the court overturned a key 1935 Supreme Court ruling that upheld restrictions on the president’s power to fire FTC members.

Meanwhile, Iran provided a solid rebuttal of a Trump social media post in which he said that peace talks will resume soon.

Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, said that no meetings with the U.S. were scheduled in the coming days, despite Trump’s announcement that talks would resume in Doha.

Iran’s Deputy Foreign Minister, Kazem Gharibabadi, also denied that any technical talks with the U.S. were planned for this week.

These denials were reported by Iranian state media, reinforcing Tehran’s position that Trump’s claim was inaccurate.

The dollar index “took a breath” following its recent rally to new yearly highs. It fell to a low of 101.07 and closed at 101.12

Economic confidence in the Eurozone edged higher in June, as selling-price expectations fell and oil prices declined amid cooling tensions in the Middle East.

The European Commission said on Monday that its economic sentiment gauge rose to 95.0 from 93.7 in May, though it remained well below its long-term average of 100. A consensus of economists polled by The Wall Street Journal expected 94.5.

The rise in the headline indicator was driven by improving confidence across most surveyed sectors, including retail trade, industry and services, as well as among consumers, the Commission said. However, sentiment in construction declined.

Views of the economy were supported as managers’ selling-price expectations continued to ease from their April peaks, while consumers’ views of inflation over the coming 12 months also eased.

Respondents were surveyed between June 1 and 22, coinciding with the announcement of the suspension of hostilities between the U.S. and Iran. During the period, the European Central Bank also raised its key interest rate for the first time in almost three years.

The outbreak of the conflict in Iran sent energy prices surging as the closure of the Strait of Hormuz rippled through global markets. Economic sentiment in the region had been improving for much of the last year, but slumped after the first U.S.-Israeli strikes on Iran.

Oil prices have been falling throughout most of June and returned to prewar levels last week.

Encouragingly for the ECB, selling-price expectations in the services sector also fell back to levels seen at the start of the year, suggesting inflation is unlikely to rise further.

“This supports the view that the ECB will leave interest rates unchanged at its next meeting in July.”

The ECB this month trimmed its eurozone growth forecasts to 0.8% and 1.2% for this year and 2027, respectively, due to the impact of the war in Iran on the economy.

Italian economic confidence data for June has delivered mixed signals, with households remaining cautious and businesses showing uneven momentum, pointing to a likely slowdown in growth during the second quarter of 2026, according to ING THINK analysis.

The June confidence reading fell to 92.4 from 93.4 in May, reinforcing a gradual downward trend that has emerged since April. While the data largely predates the US–Iran Memorandum of Understanding, economists suggest the full impact of recent geopolitical developments will be reflected in July figures.

Paolo Pizzoli, Senior Economist for Italy and Greece at ING, noted that "Italians are proving to be fairly downbeat about the general economic situation and their household balance sheet."

The Euro is stabilising after a significant fall over the past ten sessions. It rallied to a high of 1.1430 yesterday and closed at 1.1421.

Have a great day!