GBP/USD trades under pressure on Thursday, weighed down by a stronger US Dollar (USD) and rising political uncertainty in the United Kingdom.
At the time of writing, the pair is trading around 1.3482, down nearly 0.30% and remaining on the back foot for a third consecutive day
Speculation surrounding potential leadership challenges to UK Prime Minister Keir Starmer has intensified following Labour’s weak performance in recent local elections. UK Health Secretary Wes Streeting, who is widely viewed as a leading contender to replace Starmer, resigned from the government on Thursday. Starmer continues to resist mounting pressure to step down, stressing that “we can’t let a leadership contest plunge us into chaos,” while also telling ministers that his government remains a “10-year project.” Meanwhile, UK bond markets remain under pressure as investors reassess the country’s fiscal outlook.
Long-dated gilt yields surged to multi-decade highs earlier this week amid fears that a potential leadership battle within Labour could weaken fiscal discipline and increase government borrowing. The 30-year gilt yield briefly hit around 5.8%, its highest level since 1998, while the 10-year yield climbed above 5.1%, the highest since 2008. However, yields are pulling back on Thursday as investors view Wes Streeting as one of the more fiscally market-friendly figures within the Labour Party.