Pound Drops Near 2026 Low as UK Leadership Crisis Deepens
By Aboki Forex —
The British pound slipped close to its lowest level this year on Monday as investors watched for Prime Minister Keir Starmer to announce his resignation.
Sterling fell as much as 0.4% to $1.3181, edging toward the 2026 low of $1.3159 set in March. A break below that mark would put the currency at its weakest since November.
Starmer is expected to step down as soon as Monday, sources familiar with the matter said. He spent the weekend weighing his options after growing pressure from Greater Manchester Mayor Andy Burnham, who is positioning to take over.
For investors, the big question is what a Burnham government means for UK finances. Burnham has given little detail on his economic plans, leaving markets guessing on borrowing and spending.
The UK already carries heavy debt. Any hint of more bond sales to fund new spending could spook the bond market and hurt the pound further.
“Markets will focus on Burnham’s views on fiscal policy and whether he will relax the current fiscal rules,” strategists at Commonwealth Bank of Australia wrote. “A loosening in fiscal rules would likely be poorly received by the UK bond market.”
Options traders are already betting on more pound weakness. One-week risk reversals, a key gauge of market sentiment, are at their most bearish for sterling in a month.
The pound has been under pressure since Starmer’s party suffered heavy losses in local elections last month. Expectations that the Bank of England will raise rates less than the US Federal Reserve this year have also weighed on the currency.