• British Pound weakens as investors turn to safe-haven assets following renewed tensions between the US and Iran.
• Political pressure intensifies in the UK after Labour Party election losses and calls for Keir Starmer to resign.
• Markets await US inflation data and the UK’s first-quarter GDP figures later this week.

GBP/USD falls to around 1.3530 on Tuesday at the time of writing, down 0.59% on the day, as renewed risk aversion supports the US Dollar (USD) against the British Pound (GBP).

Market sentiment deteriorates following fresh geopolitical tensions in the Middle East. According to a CNN report published late Monday, US President Donald Trump has grown increasingly frustrated with how Iran is handling talks aimed at ending the conflict, while some members of his administration are now reportedly considering a resumption of major military operations more seriously.

This backdrop boosts demand for the US Dollar (USD), traditionally viewed as a safe-haven asset. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, rises 0.35% to around 98.30.

Investors also remain cautious ahead of the release of the United States (US) Consumer Price Index (CPI) for April at 12:30 GMT. Consensus expects annual headline inflation to accelerate to 3.7% from 3.3% in March, while core inflation is projected at 2.7% versus 2.6% previously. A stronger-than-expected inflation reading could reinforce expectations that the Federal Reserve (Fed) will keep monetary policy restrictive for longer, further supporting the US Dollar.

Pound Sterling is also pressured by growing political uncertainty in the United Kingdom (UK). More than 70 Labour Members of Parliament publicly called on Prime Minister Keir Starmer to step down following the party’s heavy losses in English local elections as well as parliamentary votes in Scotland and Wales.

Reuters reports that markets now fear a potential successor to Starmer could adopt a more expansionary fiscal stance, which could further strain the United Kingdom’s public finances and weigh on the British currency. Commerzbank also believes that a chaotic political transition or looser fiscal rules could place additional pressure on the British Pound.

On the macroeconomic front, investors are now looking ahead to the preliminary UK Gross Domestic Product (GDP) data for the first quarter, due on Thursday. Consensus expects quarterly growth of 0.6% after 0.1% previously. A weaker-than-expected release could reinforce concerns about slowing UK economic activity and add further downside pressure on the GBP.