Caricatures and drawings on Forex portal
Political uncertainty weighs on GBP as Starmer faces leadership pressure
Political uncertainty is weighing on the pound sterling and UK assets amid mounting problems for Prime Minister Keir Starmer, Jefferies said. Jefferies also noted that despite backing from senior figures in the Labor Party, Starmer’s position is becoming increasingly vulnerable, and a fresh challenge to his leadership could emerge around local elections in May.
Markets are concerned about potential political changes because any shift would likely favor the Labor Party’s left wing. Even if Starmer retains power, the bank said, he would probably do so by accommodating the left, which could alter policy priorities. Jefferies’ chief financial economist, Mohit Kumar, warned on Tuesday that the situation could further weaken the United Kingdom’s fiscal outlook, as fiscal policy shifts toward populist measures rather than growth support.
On the basis of these factors, Jefferies maintains a negative growth forecast for the UK economy and expects the Bank of England to undertake more monetary policy adjustments than markets currently anticipate. The firm also forecasts a steepening of the UK yield curve. Although Jefferies broadly expects a weaker dollar, it does not foresee a strengthening of sterling against the US dollar and recommends selling GBP/USD in the $1.38–$1.40 range.
Published 12 February 2026
© InstaFintech Group
![]()
© InstaFintech Group
