Sterling slid to a three-month low of $1.33 on Monday, extending last week’s losses, dragged down by a stronger US dollar and UK political pressures. The greenback remained in demand as Middle East tensions entered its second week with no sign of easing after US President Trump demanded Tehran’s unconditional surrender. This prompted concerns over rising oil and gas prices, stoking inflation fears and causing investor expectations for a BoE rate cut this month to fall below 20%, with futures markets signaling no further rate changes for the rest of the year. Sterling also faced additional pressure after Prime Minister Keir Starmer reaffirmed his decision not to join initial US-Israel strikes on Iran, emphasizing diplomacy instead. Over the weekend, Trump dismissed reports that the UK planned to deploy the aircraft carrier HMS Prince of Wales to the Middle East, calling Britain a “once great ally,” though Starmer’s office confirmed the two leaders had spoken by phone about the conflict.
