Why Starmer matters for GBP

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waterman

Written by Dan Waterman
February 10th 2026
'I'm not prepared to walk away' says PM..

£-€ fell to a 6-week low yesterday after pressure mounted on Sir Keir Starmer to resign.

However, no resignation arrived and no floodgate of cabinet members resigning did either after Scottish leader;Anwas Sanwar, called for the Prime Minister to go. 

Instead, MP's offered their support, as did potential candidates for the job in Wes Streeting and Angela Rayner. Sterling recovered and UK bond yields fell following the drama yesterday.

It has been a (to say the least) 'rocky' 19-months for the Prime Minister and too the Chancellor who looked certain at one point to lose her job back in September. 

But here's why Starmer is good for the Pound.

First of all, GBP is hyper-sensitive to political uncertainty and always has been. The UK relies heavily on foreign investment and investors know this and will jump at the chance to inflate bond yields whenever they can (in this case political instability).

Secondly, Starmer is classified as being at the right of the Labour party and in the centre of UK politics (a conservative then?). His decisions and values therefore seem more balanced (market friendly reforms and fiscal discipline) and that is welcomed by financial markets. 

Thirdly, all replacements at this point lean towards the left of the Labour Party with Andy Burnham far left. This would incur a 'premium risk' trade onto UK bond yields that would spike as welfare payments and taking on much more government debt for spending is top of the agenda here.

In this scanerio, we would see inflation rise, interest rates rise and investors/traders lose confidence in the country being able to pay back debt which will see GBP fall.

Judging by market commentary, the unseating of Starmer is coming. Labour are expected to receive a drubbing in the May local elections and so the build-up to and result of will create £ volatility.

We would expect to see a minimum of £-€1.13 mid-market should any of the above scenarios occur.

It looks quite clear to us that the longer Starmer is in power, the better it will be for GBP. "Every fight i've been in, I have won" said the PM yesterday. Let's hope so..