Pound Weakens on Strong US Jobs Data, Political Uncertainty

The pound erased earlier gains to fall below $1.34, reaching its weakest level since May 15, as investors turned to the US dollar following stronger-than-expected US jobs data. Nonfarm payrolls surged by 172,000 in May, almost double the forecasted 85,000, leading markets to fully price in a Federal Reserve interest rate hike by year-end. Political developments also weighed on sentiment, as Greater Manchester Mayor Andy Burnham announced his intention to challenge Keir Starmer for the UK prime minister role, the first time he has publicly confirmed such ambitions. Starmer has stated he will not step down. Burnham’s leadership bid depends on winning the June 18 Makerfield by-election, which would secure him a parliamentary seat and eligibility to contest the leadership. On monetary policy, markets expect nearly two Bank of England rate hikes this year, with the first likely in September.

The British pound held above $1.34 amid US-Iran negotiation concerns, including Iran’s uranium program and Lebanon’s ceasefire. US President Donald Trump suggested the US could act unilaterally on Iran’s uranium, while military clashes in Lebanon and Israel persisted despite a pending US-brokered ceasefire. Domestically, Greater Manchester Mayor Andy Burnham publicly declared his intention to challenge Keir Starmer to be Britain’s prime minister, the first time he has confirmed such ambitions. Starmer swiftly responded, stating he has no intention of stepping down. Burnham’s bid hinges on winning the upcoming Makerfield by-election on June 18, which would secure him a parliamentary seat and eligibility to contest the leadership. On monetary policy, markets anticipate nearly two Bank of England interest rate hikes this year, with the first expected in September, as policymakers balance rising inflation against early signs of a cooling labor market.

The British pound rose toward $1.35, buoyed by optimism over a Middle East ceasefire. Israel and Lebanon’s agreement to halt hostilities raised hopes for broader de-escalation in the US-Israeli conflict with Iran, though Tehran denied progress in talks with Washington and clashes continued in Lebanon. Meanwhile, the Republican-led US House voted to halt military action against Iran, defying President Trump’s administration. On monetary policy, markets are pricing in nearly two Bank of England rate hikes this year, with the first expected in September, as policymakers balance rising inflation against early signs of a cooling labor market.