Sterling Steady as Political Scandal and Middle East Tensions Weigh

The pound held around $1.35, just below last week’s three-week high, as markets grappled with political instability and rising geopolitical risks. Olly Robbins, the former Foreign Office chief who was removed from his position by Prime Minister Keir Starmer due to the Peter Mandelson ambassador controversy, revealed in his testimony that while he experienced pressure to greenlight Mandelson’s appointment, there was no direct engagement with No. 10 throughout the vetting procedure. Meanwhile, Iran denied sending a delegation to Pakistan for US talks, while President Trump accused Iran of repeated ceasefire violations, escalating tensions. On the economic front, UK jobs data showed slowing wage growth, a surprise drop in unemployment, and fewer vacancies, though the report had little market impact, as it reflects pre-war conditions and fails to capture the current labor landscape.

Sterling held near $1.35, slightly below last week’s three-week peak, as political uncertainty and geopolitical risks dominated markets. Former Foreign Office chief Olly Robbins testified over Peter Mandelson’s contested US ambassador appointment, a scandal that could threaten PM Keir Starmer if Robbins confirms Starmer was aware of failed security checks. Meanwhile, US President Donald Trump confirmed that the two-week ceasefire between Washington and Tehran is due to expire on Wednesday evening, while US Vice President JD Vance and an Iranian delegation are expected to arrive in Pakistan later today for peace talks. On the economic front, UK unemployment fell to 4.9% in the three months to February 2026, down from 5.2% the previous month and surpassing market expectations. Wage growth, including bonuses, slowed to 3.8%, and to 3.6% excluding bonuses, both marginally above forecasts. UK payrolls dropped by 11,000 in March, reflecting economic strain from the conflict.

The British pound slipped to around $1.3503, pressured mainly by a stronger dollar as investors moved toward safe-haven assets following renewed tensions between the US and Iran. Oil and gas prices surged after the US Navy seized an Iranian vessel, and Tehran responded by firing at ships and once again closing the Strait of Hormuz, reversing earlier hopes of reopening. Brent and WTI futures jumped about 6%, wiping out much of Friday’s decline. Traders have added roughly six basis points to expectations for Bank of England rate hikes this year, though only one increase remains fully priced in. Political uncertainty is also weighing on sentiment as scrutiny intensifies over Prime Minister Keir Starmer’s appointment of Peter Mandelson as US ambassador, with Starmer set to address parliament and further testimony expected from officials involved in the vetting process.