MUFG Senior Currency Analyst Lee Hardman notes that the Pound has traded volatile as UK political risks flared, with EUR/GBP spiking to 0.8742 before easing back toward 0.8700. Resignations and calls for Prime Minister Starmer to step down initially weighed on Sterling, but unified cabinet support and resistance to a leadership contest before May local elections have limited downside.

Sterling swings on UK political turmoil

"The pound has had a volatile start to this week driven by the flare up in UK political risks."

"EUR/GBP jumped to a high yesterday of 0.8742 but has since dropped back closer to the 0.8700-level."

"According to Labour sources there is strong opposition within the party to triggering a leadership contest before the local elections in May."

"A development that should help to reduce the risk of a sharper pound sell-off in the near-term."

"However, the immediate threat to Keir Starmer’s position as prime minister has since eased after cabinet ministers displayed unified support including potential leadership challenger Health Secretary Wes Streeting."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)