The British pound softened against the euro this morning, dipping to 0.8725, as political risks in the UK overshadowed fresh turbulence in EU-US trade relations.
All eyes are on the Manchester Gorton and Denton constituency, where voters head to the polls on Thursday. The by-election is being viewed as a major test for Prime Minister Keir Starmer, whose approval ratings have tanked to just 15%. A loss in a seat Labour previously won by a majority of 13,413 could reignite leadership speculation and further weigh on Sterling, according to ING strategist Francesco Pesole.
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Across the Atlantic, the Euro is facing its own headwinds. Just 48 hours after the US Supreme Court struck down Trump-era tariffs, President Trump fired back with a fresh 15% levy on global imports. The whiplash has caused the European Parliament to freeze a key EU-US trade deal indefinitely, reigniting fears of a trade war that could leave the Eurozone vulnerable.
Traders are now awaiting remarks from ECB President Christine Lagarde later today for clues on the bloc’s next move.
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