06.02.202612:18:21UTC+00Sterling Faces Worst Weekly Fall Since October

At the close of a tumultuous week, the British pound neared the $1.36 mark, poised for what could be its steepest weekly drop against the US dollar since late October. This decline has been influenced by political upheaval and an unexpectedly cautious stance from the Bank of England. Sterling faced downward pressure on Thursday due to political instability, spurred by concerns over Prime Minister Keir Starmer’s leadership. The apprehension stemmed from his decision to appoint Peter Mandelson as the UK's ambassador to the United States, a choice that attracted scrutiny because of Mandelson’s past associations with Jeffrey Epstein. On the economic policy front, the Bank of England refrained from altering interest rates, surprising markets with a tight 5–4 decision against a change. Four members of the Monetary Policy Committee advocated for an immediate 25 basis point cut, highlighting their anticipation that inflation will revert to the 2% target by April. The Bank indicated that while the threat of persistent inflation has diminished, there are now heightened concerns about weaker demand and a weakening job market.