The GBP/USD pair on Monday reached its weekly high at 1.3246. This price action was driven not only by the general weakening of the dollar amid rising risk appetite but also by the strengthening of the British currency, which reacted favorably to Burnham's speech on Monday.

The sole (for now) candidate for Prime Minister of the UK delivered a programmatic speech outlining the main directions of his political and economic course. This is a significant event, and in my opinion, it is undervalued by the market, especially given the concerns that have dominated investors in recent weeks. Traders in GBP/USD were particularly worried that Burnham would announce a sharp increase in public spending and a rise in the budget deficit (which had previously led to a crisis). However, contrary to these fears, the actual leader of the Labour Party stated that he would maintain the strict fiscal rules of the previous (currently acting) government and would not raise basic taxes (income tax, VAT, social contributions). His promise to act pragmatically and, as he put it, "not to quarrel with the bond market," was positively received by investors.

Moreover, the key focus of Burnham's program was on the policy of "decentralized growth." This policy suggests expanding the regions' economic and investment powers, accelerating infrastructure projects, and supporting industrial development. Judging by the reaction of the British currency (not only against the dollar but also in most cross-currency pairs), market participants interpreted this approach as an attempt to enhance the long-term growth potential of the British economy without immediately resorting to aggressive fiscal expansion.

Nevertheless, the pound's greatest support came from his rhetoric on budget discipline. Burnham emphasized his commitment to fiscal rules and a refusal to sharply increase borrowing.

It's important to recall that traders in GBP/USD initially reacted skeptically to Burnham's candidacy, as many analysts associated him with potentially softer fiscal policies. Recently, his economic views centered on increased public spending and the expansion of social programs, the implementation of which is associated with risks of rising budget deficits and increased issuance of government bonds.

Thus, the current rise in GBP/USD is quite justified: amid political uncertainty, the market had priced in a more aggressive fiscal-reversal scenario, but the signals were more restrained. The pound's reaction reflects not so much optimism about the program's immediate economic impact as a reconsideration of expectations for a more predictable and manageable economic policy.

In other words, the market sees Burnham not as a radical populist but as a pragmatic technocrat ready to stimulate the UK economy without inflating government debt. This balance between proposed social reforms and financial discipline has rekindled investors' appetite for the pound.

Interestingly, the British currency has ignored the UK macroeconomic data, which came out in the "red zone." The published data on Monday clearly signaled a noticeable weakening in credit activity among British consumers and a deterioration in the dynamics of the housing market. Specifically, the number of approved mortgage applications for home purchases in May sharply declined to 56,000. This indicator had shown an upward trend over the previous three months, reaching 66,000 in April. However, in May, it fell to its lowest level since December 2023, indicating a sharp cooling in housing demand. Concurrently, the volume of net mortgage lending fell to £2.9 billion (down from £4.4 billion), signaling weaker real mortgage demand and more cautious borrower behavior. Consumer credit did not offset the weakness: net borrowing totaled £1.66 billion (against a forecast of £1.8 billion), indicating reduced consumer activity among Brits.

However, GBP/USD traders ignored these macroeconomic signals, focusing on political and geopolitical factors.

From a technical perspective, buyers of the pair are currently testing the resistance level at 1.3240, which corresponds to the upper line of the Bollinger Bands indicator on the 4-hour chart. Overcoming this target will open the way to the next price barriers: 1.3280 (the Tenkan-sen line on the D1 timeframe) and 1.3320 (the middle line of the Bollinger Bands, coinciding with the Kijun-sen line on the same timeframe).