By Lucy Raitano 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
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)
