The pound traded near its 2026 low after Keir Starmer announced his resignation as Britain's prime minister, with investors weighing whether a new Labour administration under likely successor Andy Burnham could revive fiscal concerns. Sterling slid as much as 0.4% to $1.3181 early Monday, approaching the March low of $1.3159, before paring losses. Burnham's path to the premiership was cleared by his victory in the Makerfield by-election, but his lack of policy clarity has left markets nervous about potential increases in bond sales to fund spending, given the UK's existing debt struggles. Commonwealth Bank of Australia strategists warned that any relaxation of fiscal rules would likely be poorly received by the bond market and weigh on the pound. Options traders were already positioned for further weakness, with one-week risk reversals near the most bearish levels in a month, while the currency has also been pressured by expectations that the Bank of England may raise rates less than the US Federal Reserve this year.
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