The British Pound (GBP) traded lower against the Euro and U.S. Dollar on Friday after the Green Party delivered a shock victory in the Gorton and Denton by-election, overturning a sizeable Labour majority and fuelling fresh political uncertainty around Prime Minister Keir Starmer’s leadership.
Pound to Dollar (GBP/USD): 1.34665 (-0.19%)
Euro to Dollar (EUR/USD): 1.18038 (+0%)
Dollar to Japanese Yen (USD/JPY): 156.0205 (+0.1%)
Pound Sterling is also softer against the Swiss franc, Australian dollar and Norwegian krone, suggesting broader caution rather than an isolated cross move.
The modest weakness follows confirmation that the Green Party overturned a 13,400 Labour majority in the Gorton and Denton by-election, pushing Labour into third place behind Reform.
The Greens secured a 4,400 vote majority in what had been viewed as a safe Labour seat.
Barclays commented, “The Green Party won the Gorton and Denton by election overnight with 14,980 votes, around 41%, ahead of Reform UK at 10,578 and Labour at 9,364.
“The outcome intensifies focus on PM Starmer’s leadership and raises expectations that Labour may shift further left in response.
“The FT notes that Starmer’s willingness to risk defeat to avoid an internal rival, Andy Burnham, entering Parliament is a sign of his political weakness.”
Lloyds noted that the FX reaction is limited but meaningful.
“There are some signs of modest weakness in GBP following confirmation of the Greens overturning a 13.4k Labour majority.”
The result is seen as increasing political noise around Prime Minister Keir Starmer, with markets sensitive to any development that could weaken leadership stability.
UK economists at Lloyds suggests that investors may interpret the outcome as raising pressure on Labour to shift leftwards in response to the Greens’ electoral momentum.
“Both GBP and gilts may be vulnerable today to headline risk depending on the nature of the comments made by MPs in response to the result.”
ING echoes the cautious tone, arguing that downside risks for the pound remain elevated.
“Anything that is seen weakening the position of Prime Minister Keir Starmer has hit the pound as of late.”
The bank adds that the success of a more left-wing party could increase perceived risks of a more left-leaning successor should leadership questions intensify later in the year.
Political risk is landing at a delicate moment. Markets are already alert to fiscal uncertainty ahead of next week’s budget announcement and to dovish risks around Bank of England pricing.
Economists at ING remain constructive on EUR/GBP, citing “concentration risks on GBP” ranging from political noise to fiscal and rate expectations.
The pair is hovering close to what ING estimates as short-term fair value near 0.880, with scope for a move higher if pressure persists.
Domestic data offered little support.
February’s GfK consumer confidence index slipped to -19 from -16, with households notably pessimistic about the broader economic outlook.
Meanwhile, the Lloyds Business Barometer held at +44%, but hiring intentions weakened, with the net balance of firms planning to recruit falling six points to 35%.
Taken together, the moves in Sterling remain contained, but banks warn that political developments are increasingly influencing short-term price action.
If leadership speculation gathers momentum or fiscal headlines disappoint, the pound could struggle to regain traction in the near term.
Watch the full victory speech:
