Finance
Sterling Steadies Near Pre-War Levels; Traders Look Past UK Politics
Published by Global Banking & Finance Review®
Posted on April 17, 2026
3 min readLast updated: April 17, 2026
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Sterling held steady near pre‑Iran war levels (around $1.35), as markets look beyond Prime Minister Starmer’s political woes. The pound’s resilience was underpinned by strong UK GDP data and shifting expectations for Bank of England action amid the Iran war’s economic fallout.
Sterling Holds Steady Despite UK Political Tension and Middle East Conflict
By Lucy Raitano
Market Reactions to Political and Geopolitical Events
UK Political Landscape and Sterling's Stability
LONDON, April 17 (Reuters) - The British pound steadied on Friday, having returned to levels seen before the onset of the Iran war, with traders overlooking the renewed pressure on British Prime Minister Keir Starmer to resign.
Starmer is under pressure despite sacking a senior official following news that Britain's former ambassador to the United States had failed security vetting but was still handed the job.
Sterling Performance Against Major Currencies
Sterling was largely unchanged versus the dollar at $1.35305, in line with broader rangebound currency markets.
"I thought the story would be bigger for markets but Starmer has faced multiple calls to resign and seems to survive each time," said Neil Wilson, UK investor strategist at Saxo Markets.
"There is no sense that he is about to resign on this and a civil servant...has taken the flak instead. This may be enough for the market to assume that Starmer is safe for now."
Against the euro, the pound slipped 0.1% to 87.155.
Impact of Middle East Conflict on Financial Markets
The war in the Middle East has caused a global energy price spike, fanning concern around inflation and growth.
Bank of England's Policy Response
Money markets are betting on at least one 25 basis point rate increase from the BoE this year, a stark reversal from before the war began when there had been expectations for two rate cuts.
On Thursday, Bank of England Governor Andrew Bailey told BBC News that the central bank was "not going to rush to judgements" on interest rate rises.
Market Sentiment and Currency Outlook
"We have to see the BoE cut to support growth and Bailey has been trying to steer the market back a bit with his comments...if we get higher yields because of fiscal concerns then that equals a weaker currency," said Wilson.
The pound fell 1.9% in March as the Middle East conflict weighed on markets. The closure of the Strait of Hormuz - critical for the flow of energy - dealt a blow to the outlook for the British economy.
Economic Forecasts and Sterling's Performance
Earlier this week, Britain suffered the sharpest cut to economic growth forecasts for the world's large rich economies by the International Monetary Fund, and finance minister Rachel Reeves slammed the "folly" of the U.S. strategy for the conflict.
Still, sterling is headed for its best monthly performance in a year in April so far, rising 2.6% as markets are increasingly betting on a resolution to the war.
The pound also found some support this week after the latest GDP figures from the UK Office for National Statistics came in well above economists' expectations.
(Editing by Kirsten Donovan)
Key Takeaways
- •Sterling is trading around $1.353, close to pre‑Iran war levels, helped by a rebound in UK economic data and sliding expectations of rate cuts.
- •Traders are largely unfazed by mounting pressure on PM Keir Starmer over the Mandelson vetting scandal, with markets seeing the sacking of a civil servant as sufficient political resolution.
- •The Iran‑Middle East war continues to weigh on policy outlooks — energy prices and inflation have pushed markets to price in at least one Bank of England rate hike this year, a sharp reversal from earlier expectations of cuts.
Frequently Asked Questions about Sterling steadies near pre-war levels; traders look past UK politics
1Why has the British pound steadied near pre-war levels?
The British pound has steadied near pre-war levels as traders overlook UK political turmoil and focus on global events like the Middle East conflict and expectations for Bank of England rate decisions.
2How has the Middle East conflict impacted the UK economy and sterling?
The Middle East conflict has caused a global energy price spike, triggered inflation concerns, affected economic growth forecasts, and led to volatility in the sterling exchange rate.
3What are the current market expectations for Bank of England interest rates?
Money markets expect at least one 25 basis point rate increase from the Bank of England this year, reversing previous expectations for rate cuts before the war.
4Did recent GDP figures support the pound?
Yes, the latest GDP figures from the UK Office for National Statistics surpassed economists' expectations, giving the pound some support.
5What is the outlook for sterling for the rest of April?
Sterling is headed for its best monthly performance in a year, with a 2.6% rise so far in April as markets anticipate a resolution to the Middle East conflict.