BUZZ-COMMENT-If Farage is UK's next PM, would pound sink or swim?

Reuters12-16

Dec 16 (Reuters) - - The notion of Nigel Farage being Britain's next Prime Minister is no longer as fanciful as it once was, so it might be best for sterling traders to be prepared just in case.

Ladbrokes last week made Farage the slight favourite to be Britain's next PM, as it shortened the odds of his Reform UK party winning the most seats at the next general election, expected in 2029, to 9/4.

European Union-UK relations would probably turn frosty, if not freeze over, to the potential detriment of GBP, if Brexit campaigner Farage succeeds Labour's Keir Starmer in 10 Downing Street.

In contrast, Farage's warm relations with many U.S. Republican politicians could be positive for the pound if the GOP remains in the ascendancy over the Democrats come 2029.

The probability of Reform taking power after the next general election, either outright or in coalition with the Tories, will rise if the UK economy continues to splutter in the months and years ahead.

Data published on Friday showed UK gross domestic product unexpectedly shrank for a second consecutive month in October.

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(Robert Howard is a Reuters market analyst. The views expressed are his own)

((robert.howard@thomsonreuters.com))

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