Pound drops as Starmer faces pressure to step down over Mandelson scandal

The Polymarket betting site gives a 40 per cent probability of Starmer leaving office by June
The pound edged lower on Tuesday, remaining within its recent trading range as investors closely monitored Middle East developments that could prompt a rush to the safe-haven dollar.

Domestically, British data showed an unexpected fall in the jobless rate.

However, this drop was primarily due to a rise in students not actively seeking work, rather than an increase in employment, while average weekly earnings also declined.

Analysts noted that sterling failed to strengthen because the February unemployment rate likely overstated the true health of the British labour market.

Separately, Prime Minister Keir Starmer, under pressure from political opponents to step down, on Monday blamed foreign ministry officials for keeping him uninformed about the appointment of a US ambassador .

The former top official in Britain's ⁠foreign ministry who was sacked over Peter Mandelson's appointment as U.S.

ambassador said ​on ⁠Tuesday he had come under ‌a lot of pressure from the prime minister's private office to resolve his security clearance quickly.

This "is perhaps one reason why sterling is not selling off more,” said ‌Chris Turner, global head of markets at ‌ING, after mentioning the Polymarket betting site, which gives a 4o per cent probability of Starmer leaving office by June and a 67% chance by December.

The pound was last down 0.28% at $1.3496.

The euro was ⁠0.1% higher against the pound at 87.10 pence.

The greenback rose on Tuesday after falling a day earlier as uncertainty over the U.S.-Israeli war on Iran kept investors on the sidelines.

Investors are also closely watching bets on future Bank of England rate hikes .

Traders are now almost fully pricing one BoE rate hike this year, while indicating two rate increases for the European Central Bank.

Some analysts flagged ‌that the pound performed quite well against the euro while markets ​removed a lot of the expected Bank of England tightening this ‌year.

Hopes for a Middle East peace ⁠deal eased inflation fears and tempered expectations of a rapid policy ⁠tightening by central banks, including the BoE.

Currencies tend to strengthen when central banks raise rates and ‌weaken when they cut ​them.

ING said it expects no BoE ‌rate hikes in 2026, adding ​that one tightening move may not be priced out until oil prices drop.

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