Pound Under Pressure on UK Political Turmoil

2026-05-12 10:23 By Joana Ferreira 1 min. read

The pound trimmed some losses but remained lower at $1.354, retreating from near two-month highs, as political instability in the UK and stalled US-Iran negotiations weighed on sentiment.

Prime Minister Keir Starmer has vowed to stay in office despite pressure from over 70 Labour MPs to resign following the party’s poor local election performance.

Investors worry a leadership change could lead to higher fiscal spending to regain voter support, though Starmer has stated that a leadership contest has not yet been triggered.

Meanwhile, Brent crude oil prices climbed above $105 a barrel after US President Trump said the ceasefire agreement with Iran was on “massive life support” following the latest response from Tehran to the US proposal for a peace deal.

Traders are increasing bets on further Bank of England rate hikes, with markets now pricing in nearly three additional increases by year-end.



News Stream
Pound Under Pressure on UK Political Turmoil
The pound trimmed some losses but remained lower at $1.354, retreating from near two-month highs, as political instability in the UK and stalled US-Iran negotiations weighed on sentiment. Prime Minister Keir Starmer has vowed to stay in office despite pressure from over 70 Labour MPs to resign following the party’s poor local election performance. Investors worry a leadership change could lead to higher fiscal spending to regain voter support, though Starmer has stated that a leadership contest has not yet been triggered. Meanwhile, Brent crude oil prices climbed above $105 a barrel after US President Trump said the ceasefire agreement with Iran was on “massive life support” following the latest response from Tehran to the US proposal for a peace deal. Traders are increasing bets on further Bank of England rate hikes, with markets now pricing in nearly three additional increases by year-end.
2026-05-12
Sterling Slumps as Starmer Faces Growing Calls to Resign
The pound tumbled toward $1.35, down from near two-month highs touched last week, as political instability in the UK deepened. Over 70 Labour MPs have urged Prime Minister Keir Starmer to resign following the party’s poor performance in last week’s local elections, with investors fretting that a potential change in leadership could lead to higher fiscal spending in an effort to regain voter support. Elsewhere, concerns persist over the fragile US-Iran ceasefire, with Brent crude oil prices rising above $105 a barrel after US President Trump dismissed Iran’s latest response to peace proposals as unacceptable. The uncertainty has prompted investors to increase bets on further interest rate hikes by the Bank of England, with markets now pricing in nearly three additional increases before year-end.
2026-05-12
Pound Holds Near Mid-February Peak
The pound stayed above $1.36, near its highest level since mid-February, as investors weighed escalating US-Iran tensions and the aftermath of last week’s UK local elections. President Donald Trump rejected Iran’s latest proposal as “totally unacceptable,” accusing Tehran of “playing games.” While reports claimed Iran had offered to export part of its uranium stockpile, with the possibility of repatriation if talks fail, Iran denied the reports, calling Trump’s demands “excessive.” At home, Prime Minister Keir Starmer faced pressure to defend his leadership after Labour's weak local election results, as his speech offered no fresh policies. Speculation is growing over a potential leadership challenge, but Starmer has vowed to resist any attempt to oust him. On the macro front, REC/KPMG data showed hiring for permanent positions in the UK falling at the fastest pace in three months in April.
2026-05-11