Sterling began the week stronger on Monday as investors assessed the impact of the Supreme Court of the United States overturning tariffs, along with political uncertainty surrounding an upcoming parliamentary by-election.
The Pound gained 0.2% to $1.3506, supported partly by a generally weaker Dollar. It also advanced 0.1% against the Euro to 87.34 pence.
Over the weekend, US President Donald Trump announced a new 15% duty on all imports after the court ruled on Friday against his global tariff measures.
For the UK, that would mark a rise from the previous 10% rate, and the renewed uncertainty around trade policy could dampen market sentiment.
Andrew Bailey, Governor of the Bank of England, is set to appear before Parliament’s Treasury Committee later this week, an event that is drawing close attention from investors.
The central bank kept interest rates on hold earlier this month following a closely divided vote. Meanwhile, money markets are pricing in around a 75% probability of a quarter-point rate cut in March, Reuters reports.
Expectations for monetary easing have strengthened further after data released last week showed the UK unemployment rate increased in the fourth quarter of last year, while inflation in January fell to its lowest level since March 2025.
Furthermore, Manchester Gorton and Denton constituency will hold a by-election on Thursday to fill a vacant seat, in what is widely seen as an important test for UK Prime Minister Keir Starmer and his Labour Party.
Falling poll ratings and controversy surrounding his nominee for US ambassador, Peter Mandelson, who has been accused of previously leaking government information to Jeffrey Epstein, have handed momentum to his opponents. Mandelson has denied the claims.
“A heavy defeat for the ruling Labour Party could re-ignite speculation over the Labour leadership and again weigh on Sterling,” according to ING’s FX strategist Francesco Pesole.
Sterling has come under pressure in recent weeks amid concerns that a potential change in government could usher in renewed uncertainty.
Although Keir Starmer has so far managed to fend off leadership challenges, the likelihood of him leaving office by the end of the year has climbed by 12 percentage points to 63% this month on Polymarket.