26.02.202609:04:25UTC+00Sterling Slips as UK By-Election Risks Weigh

Sterling slipped to $1.35 as voters headed to the polls in a pivotal UK by-election that could have significant implications for Prime Minister Keir Starmer. The contest in the Gorton and Denton constituency was triggered by the resignation of former Labour minister Andrew Gwynne. A defeat for the ruling Labour Party would likely reignite speculation over Starmer’s leadership, following recent pressure tied to the Peter Mandelson scandal.

Investors are cautious that any political upheaval involving Starmer and Chancellor Rachel Reeves could open the door to a looser fiscal stance, amplifying concerns about the sustainability of the UK’s public finances. Market participants were also digesting US President Donald Trump’s announcement of new 10% global tariffs and a third round of US–Iran nuclear talks in Geneva, set against a backdrop of rising tensions in the Middle East.

On the monetary policy front, expectations are building for interest rate cuts from the Bank of England, as softer labour market data and easing inflationary pressures reinforce the case for a more accommodative stance.