A Labour government is not considered to be a risk scenario; in fact, investors seem sympathetic to the idea, said Roman Ziruk, a senior market analyst at the global financial services firm Ebury.
Investors want stability, and we are now at a stage whereby a Labour majority, while heavily priced in, would probably be perceived by them as a mild positive for sterling, even if only due to the avoidance of a dreaded hung parliament.
Most investors are working on the assumption that Starmer will be the next prime minister. If that comes to pass, many foresee a similar market response to Tony Blair's landslide victory in 1997, in which traders were reassured by a widely expected outcome.
Starmer's message may be change but he may turn out to be unable and unwilling to enact a significant shift in economic policy. He may also have no choice but to increase taxes to meet spending commitments.
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