The pound was trading around $1.342 at the end of May, set for a monthly loss of over 1% against the USD. The decline came amid a mix of rising political uncertainty, following UK Prime Minister Keir Starmer’s Labour Party defeat in local elections, and ongoing US-Iran negotiations to end the three-month war, which has contributed to global inflation pressures. A tentative deal to extend the ceasefire by 60 days remains pending President Donald Trump’s approval. The UK’s economic challenges, including its lack of tech stocks, heavier reliance on oil, and overall pessimism about growth, have added to the currency’s struggles, as has its vulnerability to energy shocks. On the monetary policy front, investors have slightly scaled back expectations for further Bank of England rate hikes this year, as oil prices eased from four-year highs and recent UK data pointed to a cooling labor market, softer-than-expected inflation, and signs of moderating economic activity.
