09.02.202610:33:01UTC+00Pound Holds Near $1.36 as Political Uncertainty and Rate-Cut Bets Weigh

The British pound stabilized around $1.36, remaining below the more than four-year high of $1.387 reached at the end of January, as mounting political uncertainty and shifting monetary policy expectations weighed on the currency. Political turmoil intensified after Prime Minister Keir Starmer’s chief of staff, Morgan McSweeney, resigned over the weekend, fueling speculation about the stability of Starmer’s leadership. The Prime Minister is facing renewed calls to step down from within a restive Labour Party following controversy over his decision to appoint Peter Mandelson as UK ambassador to the US, a move that has drawn scrutiny due to Mandelson’s past links to Jeffrey Epstein. At the same time, rising expectations of further Bank of England interest rate cuts have added to the downward pressure on sterling. Although policymakers left rates unchanged at 3.75% in a split vote, they struck a more dovish tone than markets had anticipated, signaling that CPI inflation is likely to return to the 2% target from April.