Sterling slid to around $1.34 in early March, hitting its lowest level since January 2026, as a resurgent US dollar gained support from a flight to safety amid escalating tensions in the Middle East. The US and Israel launched coordinated strikes on Iran over the weekend, reportedly killing Iran’s Supreme Leader, Ayatollah Ali Khamenei. In retaliation, Tehran attacked US assets in neighboring countries. Pressure on the currency was compounded by mounting domestic political uncertainty following Labour’s shock defeat in Gorton and Denton, a seat it had comfortably won in the 2024 general election. The result raises uncertainty over Starmer and Chancellor Rachel Reeves, amid concerns they could be replaced by ministers pushing higher fiscal spending, which could further strain the UK’s public finances. Markets are now focusing on a new batch of domestic data due this week, including house prices, BoE consumer credit, mortgage approvals, the Halifax House Price Index, and PMI readings.
