(MENAFN- Investor Ideas) Investorideas ( Newswire) a go-to platform for big investing ideas, including crypto stocks issues market commentary from deVere Group.

A reported leadership rift at the heart of the UK government has left the pound holding its ground for now, but investors are starting to question how long that calm can last, warns the CEO of one of the world's largest independent financial advisory organizations.

Health Secretary Wes Streeting has denied claims that he is positioning himself to replace Prime Minister Keir Starmer, but the speculation has reignited talk of internal tension at a politically delicate moment. It comes ahead of a critical Budget on 26 November, with unease growing over potential tax rises to fill a £30 billion fiscal gap.

Nigel Green of deVere Group says:“Markets are watching Westminster closely.

“Government leadership rumors surfacing before a crucial Budget reinforce the sense that the government is under strain.

“Investors aren't yet pricing in political instability, but they're alert to the risk that this story could return in the new year.”

He continues:“We believe there's unlikely to be an immediate leadership challenge after the Budget - the priority will be getting through it cleanly, but this will be extremely tough after it looks like income tax rises are now almost inevitable.

“The greater risk in terms of a leadership threat comes in May, after the local elections.

If Labour performs badly, the internal pressure will intensify, and at that point we would expect a full-on leadership contest.”

Nigel Green adds that the issue extends beyond Starmer personally.

“Prime Minister Starmer and [Finance Minister] Reeves are politically intertwined. Investors see them as one fiscal partnership, the team that restored a sense of economic discipline after years of turbulence. If one of them goes, both could fall, we believe. This scenario would unsettle markets instantly.”

Sterling trades around $1.315 against the dollar, slightly firmer against the euro, with gilt yields stable.“The pound is resilient for now,” says Nigel Green,“but this calm depends on confidence that the government will deliver a credible Budget and remain politically unified afterwards in the run up to next year's local election.

“If investors begin to get a whiff of a leadership shift in the middle of next year, that stability will fade.”

He notes that global investors have a short fuse for renewed uncertainty.

“Bond traders, in particular, remember the 2022 gilt turmoil vividly,” he says.“Any sign that the government's fiscal direction could change would push yields higher as markets demand a premium for political risk.

“The pound would soften as international investors move capital elsewhere.”

The months ahead will test whether the government can preserve stability while pursuing fiscal restraint.

“The Budget will be about numbers, but the market focus is credibility and continuity,” he says.

“They will not tolerate leadership upheaval.”

He continues:“If the Budget lands badly, and the party's polling deteriorates through spring, the leadership story will gather momentum.

“That's when you start to see the political risk premium widen - first in gilts, then in sterling. It can happen very quickly once confidence in leadership continuity is gone.”

Nigel Green concludes:“The pound's steadiness today could be temporary - it reflects hope that leadership rumours will stay quiet.

“Investors are watching carefully, aware that the calm can break without warning, especially in light of the upcoming critical Budget and nervousness around the local elections next year.”

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