LONDON: The British pound steadied on Friday, having returned to levels seen before the onset of the Iran war, with traders overlooking the renewed pressure on British Prime Minister Keir Starmer to resign.
Starmer is under pressure despite sacking a senior official following news that Britain’s former ambassador to the United States had failed security vetting but was still handed the job. Sterling was largely unchanged versus the dollar at USD1.35305, in line with broader rangebound currency markets.
“I thought the story would be bigger for markets but Starmer has faced multiple calls to resign and seems to survive each time,” said Neil Wilson, UK investor strategist at Saxo Markets.
“There is no sense that he is about to resign on this and a civil servant…has taken the flak instead. This may be enough for the market to assume that Starmer is safe for now.”
Against the euro, the pound slipped 0.1 percent to 87.155.
The war in the Middle East has caused a global energy price spike, fanning concern around inflation and growth.
Money markets are betting on at least one 25 basis point rate increase from the BoE this year, a stark reversal from before the war began when there had been expectations for two rate cuts.
On Thursday, Bank of England Governor Andrew Bailey told BBC News that the central bank was “not going to rush to judgements” on interest rate rises.
“We have to see the BoE cut to support growth and Bailey has been trying to steer the market back a bit with his comments…if we get higher yields because of fiscal concerns then that equals a weaker currency,” said Wilson.
The pound fell 1.9 percent in March as the Middle East conflict weighed on markets. The closure of the Strait of Hormuz - critical for the flow of energy - dealt a blow to the outlook for the British economy.