Pound Remains Under Pressure Amid UK Political Turmoil

The pound remained lower at $1.352, down from near two-month highs touched last week, as political instability in the UK and stalled US-Iran negotiations continued to weigh on market sentiment. Prime Minister Keir Starmer’s cabinet stayed largely intact despite a few junior minister resignations, and he has reaffirmed his intention to stay in office. Still, pressure from several ministers and over 80 Labour lawmakers for his resignation persists following the party’s poor local election results, with concerns that a leadership change could trigger higher fiscal spending to win back voters. On the monetary policy front, markets are pricing in nearly three Bank of England rate hikes by the end of the year. Investors now await a slew of economic data due Thursday, including first-quarter GDP.

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.

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.