British Pound gains as Andy Burnham to become new Prime Minister

GBP/USD gains ground after two days of losses, trading around 1.3470 during the European hours on Monday. The pair strengthens as the UK 10-year gilt yield held near 5%, driven by surging oil prices that stoked inflation fears and signaled that the Bank of England (BoE) may keep interest rates elevated for longer.

Meanwhile, market attention turned to Downing Street as Andy Burnham assumed office as Prime Minister on Monday. Investors were further reassured by reports positioning Shabana Mahmood as the leading candidate for Chancellor, easing concerns over overly aggressive fiscal expansion.

Additionally, the GBP/USD pair appreciates as the US Dollar (USD) loses ground, which could be attributed to the market expectations that the Federal Reserve will keep interest rates steady at its upcoming meeting. However, market pricing via the CME FedWatch Tool now reflects a 61.4% probability of a rate hike in September.

The Greenback may regain its ground on increased risk aversion amid escalating hostilities between the United States (US) and Iran. The US has launched its ninth consecutive night of strikes against Iranian targets. In response, Iranian officials declared that the ceasefire between the two nations has been effectively abandoned, opening the door for deepening disruptions to crucial energy pathways through the region's narrow waterways.