Sterling Stabilizes Amid Political and Economic Tensions

The British pound stabilized against the dollar after recent declines due to weak economic data and political uncertainties. Investors expect further interest rate cuts by the Bank of England. Political turmoil continues, with Prince Andrew's arrest linked to Jeffrey Epstein, affecting Prime Minister Keir Starmer's government.

The British pound steadied against the dollar on Thursday after experiencing three consecutive days of losses. This stability follows the release of economic data that increased the likelihood of further interest rate cuts by the Bank of England. Sterling stood at about $1.3483, striking its lowest level in a month earlier in the session.

Weak economic indicators, such as a rise in the jobless rate to 5.2% and slowed wage growth, have contributed to expectations of an impending interest rate cut. Inflation data revealed its lowest point since 2025, bolstering predictions of a 25 basis points cut in March, followed by another in June, according to BofA analysts.

Adding to investor concerns is ongoing political instability. Prince Andrew's arrest, connected to Jeffrey Epstein, has placed additional pressure on Prime Minister Keir Starmer. Allegations linked the case to former British ambassador Peter Mandelson, sparking calls for Starmer's resignation. The ordeal has spurred speculation about Starmer's political future, with traders estimating a significant chance of his resignation by mid-year.

(With inputs from agencies.)