Sterling slipped below $1.35 after the UK Labour Party lost a special district election, fueling renewed concerns over Prime Minister Keir Starmer’s leadership. Labour lost Gorton and Denton, near Manchester, a seat it had comfortably held in the 2024 general election, with the Green Party taking first place and Labour finishing third behind Reform UK. The result heightens uncertainty over the positions of Starmer and Chancellor Rachel Reeves, amid concerns they could be replaced by ministers favoring increased fiscal spending, further straining the UK’s public finances. Meanwhile, the UK GfK Consumer Confidence Index dropped unexpectedly in February as rising unemployment weighed on sentiment. On the monetary policy front, traders are increasingly pricing in interest rate cuts from the Bank of England, following weaker employment data and continued easing of inflationary pressures.
