Sterling hits 10-month high versus euro as traders await Burnham picks

LONDON, June 24 (Reuters) - The pound rose to a 10-month high against the euro on Wednesday as UK markets focused on who might become finance minister under Andy Burnham, the likely successor to Keir Starmer as prime minister.

The euro fell to 86.03 pence overnight, its lowest since August 2025, and was last down 0.1% against sterling.

The pound has also fared better against the dollar this month, which has rallied as traders have bet on rate hikes from the Federal Reserve amid rising U.S. inflationary pressures and a strong American economy.

Sterling was last down 0.1% against the dollar at $1.319, while the euro fell 0.2%.

Burnham looked set to have a clear run at becoming the UK's seventh prime minister in 10 years after minister Darren Jones said on Wednesday he would not run for the Labour leadership and backed the former Manchester mayor.

Current UK finance minister Rachel Reeves is likely to leave her role if Burnham becomes PM, media outlets reported on Tuesday and Wednesday, with pro-business former health secretary Wes Streeting among the names tipped for the job.

"The obstacles to a Burnham coronation are slowly being cleared, offering sterling support at the margin," said Nick Rees, head of macro analysis at Monex Europe.

Rees said Streeting's emergence as the favourite to become her successor, as reported by some media outlets, was likely to be supporting sterling.

"That said, we are still in the honeymoon period as far as Burnham is concerned, and economic realities remain challenging," he added.

Strategists at JPMorgan on Monday said the clearing of political uncertainty, with Burnham likely to become PM without a contest, would allow "sterling positive themes" such as resilient growth to come to the fore.

Despite the slight rise against the euro, the pound has fallen roughly 2% against the dollar this month as markets have raised their bets on Fed rate hikes.

Traders were last pricing in around 38 basis points of Fed rate increases this year, versus 24 basis points for the Bank of England, boosting the relative appeal of the dollar.

(Reporting by Harry Robertson; Editing by Sharon Singleton)