Sterling edges higher as Burnham set to become prime minister

His choice of chancellor has been a key question for investors in recent weeks. UK assets were supported last week by reports that he would likely pick Shabana Mahmood, regarded as a centrist, as his finance minister rather than a more left-leaning candidate. Markets took this as a signal that Burnham does not plan to ramp up spending as some investors had originally feared.

"I think there's actually quite a lot of good news priced into UK asset prices at the moment," said Andrew Wishart, senior UK economist at Berenberg.

"It's all suggesting that there's belief among investors that the Bank of England is going to hit its inflation target and the government is going to make the public finances sustainable. The big question we've got now with Andy Burnham coming in is are these things going to remain true," he said.

Wishart noted that for market pricing to prove accurate, it will be key for Burnham to stick to the fiscal rules.