【Pound Sterling fixed-rate deposits】Chinese banks are showing rare strength in raising Pound Sterling fixed-term deposit rates by 2.8 per mille, with the highest rate reaching 16.8 per mille

The Bank of England will hold its policy meeting on July 30, but this coming Thursday (July 9) is expected to become the focus in the UK again, as the Labour Party leader nomination period starts and runs until next Wednesday (15th). At present, only the front-runner, Andy Burnham, has declared that he will stand for election. If there is no competition, the fastest he could take over is next Friday (17th), succeeding the UK Prime Minister Keir Starmer, who has resigned. He could become the 7th UK prime minister to enter Downing Street to govern in the 10th year after Brexit.

See 👇👇👇👇 in the image for a comparison of UK pound fixed deposit rates

However, once multiple Labour contenders emerge, the new prime minister will be chosen in September, before the Parliament reconvenes. The market had thought the leadership race in the UK might drag on for more than three months, but it now looks like the announcement could be within about a week, sharply reducing the risk of political uncertainty—pushing the pound down to rebound to around 1.32.

Today (July 7), the pound was at 1.3395, down by more than 1% from 1.3475 at the end of last year.

Standard Chartered expert: Chen Zhengyi—UK political risk premium gradually fading; first test 1.346

Chen Zhengyi, Head of Investment Strategy at Standard Chartered Hong Kong Wealth Solutions, said this morning that the pound against the US dollar rose 0.3% yesterday, extending an eight-day winning streak and setting the longest consecutive advance since April 21, 2025. The recent price action reflects that the political risk premium that previously weighed on the pound is fading. The near-term resistance level is 1.346. However, economic fundamentals remain unfavorable for the pound: the PMI shows the economy has contracted for two consecutive months, and in the next 12 months there is still a chance of falling toward the 1.3 level.

UK political events timeline:

• May 7: Labour suffered a crushing defeat in local elections. Starmer was first revealed to have appointed a US ambassador—Vernon—whose appointment was linked to a scandal, and he was accused of misleading Parliament. This added to Labour’s local-election blowout, while facing intense internal pressure to be ousted, but he refused to step down

• mid-May: Wes Streeting resigned as Health Secretary, signaling his intent to run for Labour leader first

• end of May: a political earthquake in the UK caused the pound to plunge over 1.1% in May alone

• June 18: Makerfield constituency by-election. Burnham, the former Greater Manchester mayor, won resoundingly, bringing him back to the House of Commons and giving him the eligibility to compete for Labour leader, challenging Starmer’s position

• late June: Wes Streeting reversed course and withdrew from the race, switching to support Burnham

• June 22: Starmer officially announced his resignation on Monday. The news briefly pushed the pound below 1.32, close to the year’s low, yet the whole day ultimately ended higher

• June 23: on Tuesday, Starmer stated clearly that no major decisions would be made during the transition period, hoping for an orderly handover of power, and would fully support his successor

• June 29: “near-term prime minister” Burnham unveiled his UK 10-year outlook plan

• July 2: Burnham denied that the UK would hold an early general election, clearing away dark clouds

• July 15: at age 56, Burnham is determined to officially be sworn in as prime minister; he previously ran for Labour leader in 2010 and 2015 but failed

Xinhua Bank chief economist Ding Meng expects the UK will not raise interest rates

Experts’ UK macro analysis:

• Ding Meng, Chief Economist at China CITIC Bank (International): Choosing a new prime minister will remove uncertainty in local politics, making the government’s policies easier to implement. Therefore, in the short term it should help economic growth. For monetary policy, inflation considerations remain the primary factor in deciding whether to raise rates. Since oil prices are expected to fall after easing Middle East tensions, domestic inflation pressure is controllable. It is expected that the Bank of England will not raise rates in the second half of the year

• *Zhang Haonen, Investment Director for personal and business banking at China CITIC Bank (International): The Bank of England passed a 7-2 vote in June to keep the policy rate unchanged at 3.75%. The governor mentioned that the current geopolitical situation is still hard to predict, and inflation is expected to stay at elevated levels for a period of time. The UK domestic economic performance is gradually stabilizing: May CPI year-on-year stayed at 2.8%, unchanged and below market expectations. Meanwhile, June manufacturing PMI continued to stabilize above the 50 boom-bust line, indicating that manufacturing activity is still expanding within the expansion range. Coupled with the latest unemployment rate falling back to 4.9%, this provides some support to the weaker pound. On the other hand, the UK will elect a new party leader at the end of July and will re-elect a prime minister. The risk premium that previously dealt a heavy blow to the pound is gradually fading and could trigger capital inflows, but it is still necessary to watch for USD strength, which may limit the pound’s rise. The forecast range for the pound in the second half of 2026 is 1.3 to 1.39

• OCBC Oversea-Chinese Banking Corporation economist Wang Haoting said the near-term outlook for the pound is neutral. In the next two weeks, support is expected at 1.3183; resistance is in the 1.3368 zone. For the long term, because the USD is relatively strong, it trimmed its pound forecast for year-end from 1.36 to 1.28, and from 1.33 to 1.26 in mid next year. Given recent political events in the UK, the magnitude of the pound’s downside is limited. With no competition, Burnham is expected to become the UK’s next prime minister. It is reported that former Health Secretary Wes Streeting may take over as Chancellor of the Exchequer, reducing political uncertainty and limiting the pound’s fall

Market focus is now shifting to Burnham’s team—how the government would choose the finance minister candidate, and the direction of future fiscal policy. Preliminary signals suggest the government prefers to continue the current fiscal framework. Looking ahead, even though UK inflation continues to ease, economic growth remains resilient, prompting the Bank of England to stay cautious about loosening monetary policy. The initial reading of the UK June composite PMI fell to 49.4, with the services PMI dropping to 48.7, the lowest since January 2023.

UK political uncertainty sharply down; pound FX rebounds from the trough

The pound has suffered from political-market concerns, yet its decline has been limited—supported by five main reasons:

(1) Less internal power struggle: After Starmer confirmed he would leave, the pound first fell then stabilized, and even rose during the day (June 22) by 0.14%, closing at 1.3251. Since Burnham is seen as a successor favorable to the market and quickly took the lead in the campaign.

(2) Jumping into Europe early: Wes Streeting supports the UK returning to the EU. The market expects that after Burnham becomes prime minister, he may be invited into the cabinet as a reward for support, which led the market to again rehash the idea of returning to the EU. Polls show more than half of respondents support returning to the EU. Admittedly, in the 10 years since Brexit, the UK pound is still lagging: the economy is weak, Starmer has already been replaced by six prime ministers, and the pound has long underperformed the broader market. Based on Labour’s election loss in May, it fell 0.14% in the month alone.

(3) Credible fiscal plan: Burnham, who is certain to take over as prime minister from Starmer in the short term, said on the social platform Reddit that he has no intention of calling an early general election. He also insists on Labour’s election platform and commitments in the 2024 general election—for example, strengthening control over public services such as water utilities, which may range from stricter regulation to implementing nationalization.

(4) Interest-rate spread advantage: The UK benchmark interest rate is currently 3.75%, which is only behind Australia’s 4.35%, and is just below the US federal funds rate. It is the 2nd highest-yield interest-rate currency among G10.

Mainstream currency interest rates:

• Australian policy rate 4.35%

• UK 3.75%

• US federal funds rate 3.5% to 3.75%

• New Zealand, Canada and Eurozone 2.25%

(5) UK stocks outperform: In the first half of the year, the UK FTSE 100 index rose 5.7%, outperforming Germany’s near 2.1% gain and France’s 3.1% rise over the same period. However, in Q2, the political market limited gains, and UK stocks rose only about 3.2%, but still marked a sixth consecutive quarter of gains. It lagged Germany’s strong rebound of 10.2% and France’s rise of 7.5%.

CITIC rare strong 7-day annual interest 2.8% to 13.8%

In recent times among the three major banks raising UK pound time deposit rates, including CITIC Bank and Nanyang Commercial, they all moved to 7-day short deposits in one go, with the same 13.8%. But it still does not beat Construction Bank Asia, which tops the city at 16.8%.

Latest updates on UK pound time deposits in Q3:

Rate hikes:

• Bank of China Hong Kong previously sharply increased the 7-day annual yield by 2.8 percentage points to a new rate of 13.8%

• Standard Chartered previously increased the 3-month annual yield by 0.4 percentage points to 3.3%, raising the 6-month by 0.3 percentage points to 3.1%. Both deposit tenors are now above HSBC, which offered 2.9% and 2.8% respectively, bringing them close to (and backtracking) Bank of China Hong Kong

• Nanyang Commercial increased the 7-day annual yield by 0.8 percentage points to 13.8%

• Construction Bank Asia sharply increased the 3-month rate by 2.0 percentage points to 8.88%. Previously, the 6.88% applied only to 25% of principal; now it has been further reduced to 15%. However, the deposit cap increased from $2.5 million to $3 million

• Hang Seng? Xingye today raised the 6-month by 0.1 percentage points to 2.9%

Rate cuts:

• Xingye yesterday reduced the 6-month by 0.1 percentage points to 2.8%

At the start of the second half, the rankings for high-yield offers have not changed much. The 6-month term continues to see digital banks hard-challenging traditional mainland Chinese banks: WeLaB at 3.5%, matching ICBC (Asia) at the same—earning them both the “double cannon” title.

Digital banks hard-challenging mainland Chinese banks to grab UK pound time deposits

High-yield comparison:

7-day short-term:

• Construction Bank Asia 16.8%

• HSBC 15.5% (in April added 1.5 percentage points; can be opened at branches or by phone wealth management, eligible for converting new funds)

• Fubon 15.38% (reduced by 5.5 percentage points last June)

• China CITIC International 15% (June added 2 percentage points), Hang Seng (threshold—reducing from HK$1 million equivalent conversion funds, and in June it was cut sharply to HK$10k) both at 15%

• HSBC 14.5% (in April added 1.5 percentage points; mobile wealth management annual interest rate)

• Standard Chartered 14.3% (in April added 2.3 percentage points)

• Citibank? (Actually “集友”) 13.88% (just extended, deadline end of September)

• Bank of China Hong Kong 13.8% (jumped by 2.8 percentage points in June)

• Nanyang Commercial 13.8% (added 0.8 percentage points on June 18)

• DBS (in June, cut online opening by 1 percentage point; now aligned with the branch-opened rate) 10%

• Xingye 2.6% (recently added 0.3 percentage points; no need to exchange funds)

• ZA Bank 0.01%

Top high yields in the medium-to-long term:

• 1 month: Fubon 5.38% (reduced by 2.7 percentage points in June last year)

• 3 months: Shang? (上商) 3.55%, plus Construction Bank Asia 8.88% (but only for the first 15% of deposits)

• 6 months: WeLaB Bank + ICBC (Asia) 3.5%

• 1 year: ICBC (Asia) 3.5%