FX.co ★ Pound Under Pressure on UK Political Turmoil

The pound pared some losses but remained weaker at $1.354, pulling back from near two-month highs as political uncertainty in the UK and stalled US–Iran talks dampened market sentiment. Prime Minister Keir Starmer has pledged to remain in office despite calls from more than 70 Labour MPs for his resignation after the party’s disappointing local election results. Investors are concerned that a potential change in leadership could usher in higher fiscal spending aimed at rebuilding voter support, even though Starmer has emphasized that no leadership contest has yet been triggered. At the same time, Brent crude rose above $105 a barrel after US President Trump warned that the ceasefire agreement with Iran was on “massive life support” in response to Tehran’s latest reply to a US peace proposal. Against this backdrop, traders have ramped up expectations of further Bank of England tightening, with markets now pricing in nearly three additional rate hikes by the end of the year.