Pound Weakens on UK Leadership Uncertainty

The pound fell to $1.35, its lowest since late April, after The Times reported that Health Secretary Wes Streeting is preparing to launch a leadership challenge against Prime Minister Keir Starmer. Starmer, whose cabinet has remained largely intact despite a few junior minister resignations, has reaffirmed his intention to stay in office despite pressure from several ministers and over 80 Labour lawmakers calling for his resignation following the party’s poor local election results. At the same time, stalled US-Iran negotiations and the closure of the Strait of Hormuz have kept oil prices high, with markets pricing in nearly three Bank of England rate hikes by year-end. Investors also awaited a slew of economic data due Thursday, including first-quarter GDP.

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.