Sterling falls as UK political crisis, rate-cut bets grow

The British pound weakened against major currencies on Monday as political turmoil surrounding Prime Minister Keir Starmer and expectations of interest rate cuts weighed on investor confidence.

Sterling fell against the euro and slipped against the U.S. dollar following the resignation of Starmer’s chief of staff, Morgan McSweeney. He stepped down after taking responsibility for advising the prime minister to appoint Peter Mandelson as the UK ambassador to the United States despite controversy surrounding past associations, News.Az reports, citing Reuters.

Market analysts say political uncertainty has added pressure on the currency, especially as Starmer faces declining public approval and upcoming local elections.

Currency markets were also reacting to last week’s Bank of England decision to hold interest rates. The close vote strengthened expectations that the central bank may cut rates later this year. Lower interest rates often make a currency less attractive to investors.

The euro was last trading about 0.52% higher against the pound, while sterling was down slightly against the dollar at around $1.36.

Analysts say continued speculation about leadership changes in the UK government and signals of a more dovish stance from the Bank of England could keep pressure on the pound and UK government bonds in the near term.

News.Az 

By Aysel Mammadzada