Live Markets: One explanation for sterling resilience

STMicroelectronics NV

02/06/2026 09:19

Adds new blog entry
STOXX 600 up 0.9%
Tech, miners lead gainers
Oil & gas stocks lag
U.S. futures lower
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ONE EXPLANATION FOR STERLING RESILIENCE
Sterling's resilience in the face of a global energy shock and renewed UK political strife is a puzzle for some currency watchers. For others, an explanation can be found in strong inflows resulting from merger and acquisition activity.
The pound is up roughly 0.8% against the euro so far this year EURGBP= and flat against a broadly firmer dollar GBP=. 
 It's not a bad performance given that the Iran war has dealt the UK economy a fresh blow, while questions over Prime Minister Keir Starmer's future have revived political instability worries and helped drive gilt yields higher.
BofA currency strategists believe that trends in global M&A, which account for the largest component of UK foreign direct investment, are reasons to be optimistic about sterling's outlook. 
According to their research, the 12-month rolling sum of UK net M&A, where the deal involves some cash element, has been on a sharp upward trend since 2024. 
 A rush of foreign bids for UK companies has put Britain on track to outstrip all previous records for dealmaking in 2026, with M&A in the country more than tripling from this time last year to $192 billion so far.
BofA currency strategist Kamal Sharma said the UK had emerged as an attractive destination for AI-linked inflows on top of financial services and a biotech influx from overseas. 
"Whilst this may not immediately translate into a healthier balance of payments position, it perhaps provides a reason why sterling has been resilient against the backdrop of ongoing political uncertainty," he said.
"Further out, a higher productivity/capital intensive mix of FDI (foreign direct investment) inflows should be seen as a medium-term positive for sterling valuation trends," Sharma added. 
(Dhara Ranasinghe)
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EARLIER ON LIVE MARKETS: 
TECH, MINERS LEAD EUROPE HIGHER CLICK HERE
EUROPE BEFORE THE BELL: FUTURES POINT TO STRONG START CLICK HERE
NVIDIA CHIEF TO ASIA: 'WE'RE STILL SUPPLY CONSTRAINED' CLICK HERE
     

US crude oil price in USD per barrel https://www.reuters.com/graphics/AUTOMATED-20260601/CLCV1-COMMODITY-365D/znvnmwlwqpl/chart.png
Tech, miners lead European stocks higher https://www.reuters.com/graphics/GLOBAL-STOCKS/zjpqmramkpx/chart.png
UK seeing a sharp increase in inflows https://www.reuters.com/graphics/GLOBAL-FOREX/gdpzaxnakvw/chart.png