27/06/2026 by Tony Redondo
“If it’s all going so fine, why is he resigning?” That was Conservative leader Kemi Badenoch’s question at PMQs this week, cutting through Sir Keir Starmer’s narrative of a recovering Britain (falling NHS waiting lists, children lifted from poverty) as he announced his resignation as PM.
It’s all-change at Westminster with Starmer joining Cameron, May, Johnson, Truss, and Sunak as the UK awaits it’s seventh Prime Minister in 10 years. Starmer has resigned less than two years after leading Labour to victory in the July 2024 election, and almost exactly 10 years since the Brexit referendum. He’ll stay in post until a leadership contest concludes, to ensure an orderly handover.
Former Manchester Mayor Andy Burnham, recently elected to Parliament via the Makerfield by-election, is the overwhelming favourite to succeed him, having been endorsed by potential rival Wes Streeting. Under Labour’s process, Burnham becomes PM automatically on 16 July if unopposed; if challenged, a full contest runs through to 29 August. Over 100 Labour MPs are reportedly uneasy, less about Burnham himself, says Darren Jones, than about who he’d install as Chancellor and what that means for Labour’s economic credibility.
Rachel Reeves looks unlikely to survive as Chancellor despite wanting to stay. Ed Miliband is the rumoured frontrunner, backed by Unison, though Lord Richard Walker (Iceland’s executive chairman and Labour’s cost-of-living chief) has warned that Miliband would be a “disaster,” spooking markets and businesses alike with overly ideological climate policy. Wes Streeting is seen as the more bond-market-friendly alternative. Burnham is taking economic advice from Andy Haldane (BCC President) and former Goldman Sachs banker Jim O’Neill.
Whoever takes the Treasury inherits a tough fiscal picture. Labour’s growth “mission” hasn’t matched the Blair-era pace, hampered by the UK’s productivity puzzle, lingering pandemic effects, and the fallout from Russia’s invasion of Ukraine. Inflation was easing toward the BoE’s 2% target, but the Iran war threatens a difficult second half of 2026. Debt-interest payments are now nearly double the Ministry of Defence’s budget, while a weakening jobs market with vacancies down sharply, employers squeezed by wage pressure, red tape, and a £25bn rise in labour taxes adding to the strain.
A YouGov poll found 48% of Britons now back a General Election, piling further pressure on Labour as it races to install Burnham, still the clear favourite in Downing Street.
Currency Exchange Rates Update
The Pound hit its highest level against the Euro since August 2025, a 10-month high this week. On the Pound side, elevated UK bond yields remain a key driver in a currency world where the carry trade still matters. The benchmark 10-year UK gilt yield is 63% higher than the German Bund and 29% higher than the French 10-year, attracting capital inflows into the Pound relative to the Euro, provided global sentiment stays constructive. That’s the case at present, helped by the US-Iran peace accord. Markets also seem willing to give Andy Burnham the benefit of the doubt or at least have simply priced in the “least-bad” outcome of recent developments.
https://www.gbnews.com/money/pound-reaches-strongest-level-against-euro
The polar opposite for the Pound against the US Dollar as it sunk to its lowest level against since November 2025, a seven-month low. JPMorgan has turned bullish on the US economy and the Dollar’s outlook for the second half of the year, arguing that global growth is recovering but “Dollar exceptionalism” will persist, with US cyclical strength and yield dominance underpinning the currency. Fed rate rises will also play their part. Last week’s Federal Reserve decision proved far more hawkish than expected, with new Fed Chair Kevin Warsh expressing a surprisingly strong commitment to fighting inflation, both Dollar-supportive. On the UK side, the 10-year bond yield differential between the UK and US is much tighter, at 5.5%, compared with the UK’s advantage over its eurozone peers leaving the UK with only a minimal carry-trade advantage over the US.
The Pound hit a 2-week high against the Aussie Dollar and is a fraction away from hitting an 11-week high. The Aussie is fading as the markets price in the possibility of one more RBA (Reserve Bank of Australia) interest rate rise this year but now expect the RBA to cut next year, ensuring AUD’s interest rate tailwinds are set to fade.
In the coming week, the key economic data releases and significant events include:
Monday EU Consumer Confidence Index
Tuesday UK GDP
China PMI Manufacturing
Germany Employment & CPI Inflation
Canada GDP
Wednesday UK Nationwide House Price Index & PMI Manufacturing
EU PMI Manufacturing & CPI Inflation
US PMI Manufacturing
Thursday EU Employment
US NFP Employment & Factory Orders
Friday EU PMI Composite
What’s in the news?
The best asset class returns over the past century reveals a striking correlation with historical economic cycles. The deflationary grip of the 1930s Great Depression left gold as the premier protector of capital, which gave way to a roaring post-WWII industrial boom that made the 1940s and 1950s a golden era for equities. When stagflation took hold in the 1970s, hard assets like gold and real estate dominated as powerful inflationary hedges, only for the 1980s and 1990s to usher in the Great Moderation and a massive tech-driven equity bull market. The script flipped again in the 2000s, where the Dot-Com crash and the 2008 financial crisis led to a lost decade for stocks while fuelling a massive commodities and gold super-cycle, before ultra-low interest rates pushed equities back to the top throughout the 2010s. This brings us to the 2020s, a unique landscape where equities, gold, and real estate have all shown remarkable strength, while bonds, historically the reliable, stable backbone of a portfolio have suffered a brutal period of deeply negative real returns driven by surging inflation and rising interest rates. Looking at the long-term sweep of the past 96 years, the ultimate hierarchy of wealth creation is clear: equities lead the pack with an average annualized return of 10.3%, followed by gold at 5.6%, real estate at 4.7%, and bonds trailing at 4.3%.
UK
Leading economist Dr. Gerard Lyons, in a report for the CPS (Centre for Policy Studies), argues that Britain’s economy is growing faster than France, Germany and Italy, and that Labour’s determination to drag Britain closer to the EU could harm the country’s chances of strong economic growth. Instead, Britain should make the most of its Brexit “freedoms” to transform the economy.
The UK economy has grown by 12.1% since the 2016 referendum and by 5.3% since we left the EU, outpacing all three of our European G7 competitors, France, Germany and Italy. Lyons argues that the UK’s weaker GDP per capita is largely down to our inability to execute pro-growth policies and has not been helped by record-breaking net migration figures, both factors within the control of politicians in Westminster, not Brussels.
Although still important, the EU’s share of the global economy is declining, down from 15.5% in 2016 to 14.0% in 2025, and will continue to do so in the coming years. One of the many trade-offs of a closer relationship with the EU would be limiting our ability to strike new trade deals with countries in the world’s fastest-growing regions.
Long-term gilt rates traded close to 30-year highs this week as UK markets priced in uncertainty. The benchmark UK 10-year gilt finished at 4.7317% on Friday, up from 4.47% a year ago. Tony Whincup, head of investments specialists at TrinityBridge said, “Investors are fretting that a more left-leaning challenger might spend without restraint. Bond markets look quite subdued for now, but it wouldn’t take much for them to turn. In May, the 10-year gilt yield topped 5.17% and the 30-year yield 5.85%.”
Susannah Streeter, chief investment strategist at Wealth Club, said: “The markets have been wracked with volatility this week, and the see-saw moves just keep coming. Investors are super-weary about the fragility of the Middle East peace deal after a vessel was struck while transiting the Strait of Hormuz. Fears of geopolitical fracture opening up again are colliding with a return of worries about super-high-tech valuations.”
Not so good news
June’s PMI survey data undershot expectations and pointed to an economy that contracted for a second successive month. The services PMI fell from 49.3 to 48.7, undershooting expectations for a recovery into growth territory at 50.1. Manufacturing is still growing, although the result of 53.1 undershot expectations for 53.5. The composite PMI, which balances the data to give a representative reading of the wider economy came in at 49.4, down from 49.7 and below the 50.6 estimate. A PMI below 50 indicates contraction and the UK services sector accounts for around 81% of the overall economy.
James Roberts, Blevins Franks’ chief executive speaking to FT Adviser, said the firm had seen a “rapidly growing number of inquiries” from people looking to move to Europe. Roberts said, “The vast majority are now citing tax and that slight feeling that in the UK they are not feeling welcome as a wealth creator or someone who has created wealth in their life” adding “When the only people left are those on the public payroll, the tax rates will be irrelevant”.
Savills expects the Government to fall short of its housebuilding promise by 662,500 homes. The firm estimates an average of 167,500 new-build homes will be completed annually in England from 2024/25 to 2029/30, significantly below the Government’s target of 300,000. Data shows that planning consents for new developments have dropped by 39% in three years.
USA
The Fed’s preferred inflation gauge, core inflation rate hit 3.4% in May, the highest rate since October 2023. Even with the elevated inflation levels, consumer spending for the month came in stronger than expected. Personal consumption expenditures rose 0.7% for the month. Also, GDP rose at a seasonally adjusted annualized pace of 2.1% in the first quarter, up 0.5% from the prior reading. This data comes a little more than a week after the Fed under its new chair Kevin Warsh delivered what markets widely viewed as a tough talk on rates and inflation.
Warsh in particular stressed the importance of price stability, with the FOMC (Federal Open Market Committee) in its post-meeting statement unequivocally stating that it would “deliver price stability” after missing its 2% inflation target for five years running. In addition, officials took off a previously indicated rate cut this year and indicated a likelihood of a rate rise.
US banks sailed through their government stress tests, helped by advance knowledge of the hypothetical doomsday scenario they’d be put through. The big banks took the smallest hit to their capital, just 1.6%, since the 2019 exercise.
A Gallup poll shows Americans’ view of the US economy improved in June, but two-thirds are facing financial hardship due to rising gasoline costs. Those mixed results from out today help inform the White House’s struggle to get past the economic effects of the Iran war. 57% said gas prices have caused them to scale back driving, while 46% said they’ve led to changes in summer vacation plans. At the same time, Americans’ views of the economy improved this month after sharp declines earlier this year with 45% described current economic conditions as poor, down from 49% in May.
The EU
The eurozone’s economy contracted by 0.2% in the first quarter of 2026 as the flash June composite PMI readings remained below 50 for a third consecutive month and Germany’s private sector activity has fallen at its fastest pace since 2024.
The EU has a trade deficit of almost exactly €1 billion per day every day with China mainly due to the Yuan being kept artificially low by approximately 25%. China has exacerbated the problem by keeping much of its overseas earnings in Hong Kong rather than repatriating them which serves artificially to cheapen the Yuan. EU Commission President Ursula Von der Leyen has described the EU trade deficit as unsustainable.
Volkswagen is preparing the most dramatic restructuring in its history as the German automotive giant moves to cut costs, reduce investment and reshape its global operations in response to intensifying competition from Chinese electric vehicle manufacturers. The company is reportedly considering a reduction of up to 100,000 jobs worldwide, including around 50,000 positions in Germany by 2030, as it attempts to restore profitability after a sharp deterioration in earnings. Four German manufacturing sites have reportedly been identified for potential closure, including facilities in Hanover, Zwickau, Emden and Audi’s Neckarsulm plant, as the company seeks to cut excess capacity. The proposed changes have triggered opposition from employee representatives and unions.
Volkswagen currently employs more than 667,000 people globally. Germany remains the company’s largest employment base, accounting for around 43% of its workforce, while its UK operations include headquarters in Milton Keynes and hundreds of direct employees alongside thousands working indirectly through its supply chain.
A record 140,000 millionaires migrated last year, research suggested, as the wealthy flee taxes or instability. For the first time last year, France, Germany, and Spain lost more wealthy residents than they gained, as fears of wealth taxes grow.
Italian Prime Minister Giorgia Meloni is reportedly considering early elections, as her popularity dips. Italy must vote by the end of 2027, but Meloni is reportedly eyeing an April 2027 date. The most pressing challenge for her comes from the right-wing National Future Party which has surged in polls and poached at least eight MPs from Meloni’s coalition.
A judge has ordered Begoña Gómez, the wife of Pedro Sánchez, Spain’s prime minister, to stand trial for corruption and barred her from leaving the country. Begoña Gómez must surrender her passport, and judge puts border guards on alert ahead of the court case. Begoña Gómez is accused of exploiting her relationship with Pedro Sánchez to advance her professional career
No date has been set for the politically explosive trial.
Australia
Australia’s flash composite PMI climbed in June from 48.7 to 49.8. Manufacturing strengthened from 50.7 to 51.2, while services improved to 49.9. Activity is close to the 50 level that separates contraction from growth, but momentum still looks fragile. New orders continued to fall as uncertainty lingered, and business confidence slipped to its lowest level since the pandemic. Price pressures eased from April highs, though costs remain elevated.
Australia added 40.3k jobs in May, beating expectations of 32.5k. However, the previous month was revised sharply lower to a 40.7k drop from an earlier estimate of -18.6k. The participation rate held steady at 66.7%, up slightly from 66.6%. The unemployment rate eased from 4.5% to 4.4% in line with forecasts.
Household spending also picked up, rising 5.5% year-on-year in May, ahead of the 4.3% forecast and a revised 5.1% previously.
Australia’s May CPI rose by 4.0% y/y, undershooting expectations of 4.3% and easing from 4.2% previously. However, underlying pressures firmed, with trimmed mean CPI printing at 3.6% y/y, above both the 3.5% forecast and 3.4% prior.
While Australia’s headline numbers look stable from the outside, it is a two-track economy. Massive tech-infrastructure spend is masking an aggressive contraction in household disposable income, leaving the RBA with very little room to pivot toward rate cuts anytime soon.
Canada
Canada’s inflation rate accelerated to 3.2% in May, beating expectations just as the economy slides toward recession. This is a classic case of stagflation. Raise rates and deepen the slowdown, cut rates and reignite inflation.
Canada is especially exposed. It’s already in a technical recession with household debt among the highest in the developed world, and housing affordability has become a national crisis. Citizens are squeezed on food, energy, insurance, and taxes, while government spending keeps expanding regardless.
The deeper issue isn’t inflation but structural. Canada has grown overly dependent on government spending, real estate, and debt expansion, while investment declines and capital flows south to the US. Debt can manufacture the illusion of prosperity, but not real wealth, and federal and provincial debt has ballooned for a decade on the assumption that low rates were permanent. That assumption is now unravelling, forcing governments to spend ever more tax revenue just servicing debt.
The single largest downside risk gripping the business community is trade uncertainty with the US. The CUSMA (Canada-United-States-Mexico Agreement) faces a major 1st of July joint-review deadline. Real goods exports are down 5.2% year-over-year, and non-financial firms are reportedly sitting on a historic $650 billion in cash reserves, waiting for trade clarity before committing to private investment.
Others
Passenger train services will launch in the UAE next week, a milestone in a years-long push to connect the emirates and part of a wider regional ambition to link the Gulf countries by rail. Driverless cars and flying taxis may still be on the agenda, but the new 55-dirham ($15) route from Abu Dhabi to Fujairah, cutting about 40 minutes of drive time has long been anticipated by road-weary residents.
The route adds to the stalled GCC Railway, a 2,200-kilometer network due to be completed by 2030. Gulf leaders are betting on rail to move tourists and business travellers between hubs including a high-speed Abu Dhabi-Dubai line projected to add almost $40 billion to the economy over 50 years while a Doha-Riyadh airport connection aims to ferry 10 million passengers annually, starting in 2031.
Brent oil prices finished the week below $72 a barrel at a 4-month low before the US military struck Iran after President Trump accused Tehran of ceasefire violation by launching drone attacks on ships in the Strait of Hormuz. US Central Command said its aircraft “struck Iranian missile and drone storage locations and coastal radar sites.”
Stranger than fiction
NASA’s Perseverance rover has found organic molecules in a Martian rock formation that show patterns similar to fossilized bacterial blooms on Earth. The rover shone a laser at spots on the “Bright Angel” rocks, and scientists analysed the reflected light, revealing complex carbon molecules similar to those found in Earth life. The finding doesn’t confirm Mars was once living as similar molecules can form through non-living chemical processes and are found on asteroids no one believes harbour life, but it leaves the possibility open. Researchers note that similar molecules were also found by the Curiosity rover 2,000 miles away, suggesting that conditions hospitable to life may have been widespread on Mars billions of years ago.
German researchers have built the most efficient solar panel ever, converting 34.4% of sunlight into electricity, far above the 20–23% typical of ordinary rooftop panels. It’s a research breakthrough rather than a commercial product, but it points to how much further solar technology could still improve.
A Mayan city hidden for more than 1,000 years has been discovered in the Mexican jungle. Airborne laser mapping let researchers peer through the dense canopy to detect the 37-acre settlement on the Yucatán Peninsula, which includes a 43-foot pyramid temple; the team then cut a three-mile path through the jungle with machetes to reach it. The site dates to the Late Classic period (roughly 250–900 AD), the height of Mayan civilization, when vast, intricately designed buildings reflected advanced astronomical and mathematical knowledge. At its peak, the Mayan population, spread across much of present-day Mexico and Central America may have reached 16 million, before the civilization mysteriously collapsed within a century.
Quote
Albert Einstein, “I have no special talents. I am only passionately curious”