Investing.com — The pound fell against the euro and dollar on Monday as traders responded to the political crisis facing UK Prime Minister Sir Keir Starmer and anticipated further interest rate cuts.
Sterling dropped after Morgan McSweeney, Starmer’s chief of staff, resigned on Sunday. McSweeney was forced to step down due to his involvement in the controversial appointment of Peter Mandelson as UK ambassador to the United States last year.
The appointment is now under further official scrutiny, raising questions about Starmer’s judgment. The prime minister’s challenges are expected to intensify with an upcoming by-election in late February and local elections in May.
As of 10:45 GMT, the euro climbed 0.4% against sterling, with at 0.8716. Pound fell 0.02% against dollar to 1.3610.
ING analysts predict continued pressure on both the pound sterling and UK government bonds (Gilts) as markets speculate about potential leadership changes at 10 and 11 Downing Street.
This political uncertainty, combined with the Bank of England’s dovish stance at last week’s meeting, is weighing on the pound.
ING sees initially targeting the 0.8740/45 level, with potential to reach 0.8800 if speculation grows that Starmer might step down.
