Pound Nears Two-Week Low as UK Leadership Speculation Swirls

The British pound held just above $1.35 on Thursday, near its weakest level since late April, as markets focused on potential leadership challenges to Prime Minister Keir Starmer. Health Secretary Wes Streeting, seen as the most market-friendly candidate, is expected to resign this week and may launch a bid to replace Starmer as soon as today. Meanwhile, Angela Rayner, another potential contender, was cleared by HMRC in a tax probe, possibly clearing her path to join the race. Rayner’s more left-leaning stance is viewed as negative for the gilt market. Economically, UK GDP grew by 0.6% in Q1 2026, with annual growth at 1.1%, better than anticipated. March’s unexpected 0.3% expansion, defying forecasts of a 0.2% contraction, drove the upside.

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.