Published by Global Banking & Finance Review®
Posted on November 12, 2025
3 min readLast updated: January 21, 2026
Add as preferred source on GoogleThe British pound weakens amid leadership uncertainty surrounding Keir Starmer, impacting economic outlook and budget implications.
By Samuel Indyk
LONDON (Reuters) -The British pound fell for a second day on Wednesday after soft labour market data the day before and reports in British newspapers that Prime Minister Keir Starmer was on alert for an attempted plot to oust him.
Several British media outlets on Wednesday cited allies of Starmer saying the prime minister would fight any challenge to his leadership. Health Secretary Wes Streeting denied reports he was plotting to bring down the prime minister.
"The pound is staying weak and you'd think it probably does relate to this Starmer story," said ING head of research Chris Turner.
"The uncertainty around the post-budget environment demands extra risk premium for sterling."
The pound was last down 0.2% against the dollar to $1.3125.
Against the euro , sterling slipped as much as 0.2% to 88.26 pence, close to its lowest level in 2-1/2 years.
BUDGET IN FOCUS
Sterling is still sitting on a hefty 5% gain against the dollar this year, but angst is rising ahead of the November 26 budget, where tax rises are expected to be needed to balance the public accounts.
The outlook for the public finances has deteriorated because of previous plans to water down welfare spending cuts and an expected cut to productivity forecast by Britain's budget watchdog.
British bonds were underperforming peers in Europe and the U.S. on Wednesday, with the 10-year gilt yield up 3 basis points. Bond yields move inversely with prices.
BOE DECEMBER CUT STILL ON RADAR
Markets were placing about a 75% chance of a quarter-point reduction in borrowing costs from the Bank of England next month after Tuesday's labour market data that showed a tick up in the unemployment rate to 5%.
Meanwhile, pay growth, excluding bonuses, slowed to 4.6% in the three months to September.
The pound fell against both the dollar and euro on Tuesday as the data provided hints that inflation pressures were easing.
"We think the UK economy is weaker relative to the euro area, which should pave the way for a weaker pound here," said Mohamad Al-Saraf, FX strategist at Danske Bank.
In remarks on Tuesday, BoE rate-setter Megan Greene welcomed the fall in wage growth, although she showed concern about surveys pointing towards relatively high pay settlements next year. Greene voted with the majority to keep the Bank Rate unchanged at last week's policy meeting.
(Reporting by Samuel Indyk; editing by Philippa Fletcher)
The British pound, often referred to as GBP, is the official currency of the United Kingdom. It is one of the world's oldest currencies still in use and is subdivided into 100 pence.
Bond yields represent the return an investor can expect from a bond. It is typically expressed as an annual percentage and varies inversely with the bond's price.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
Explore more articles in the Finance category
