Pound to Dollar Forecast: GBP Retreats as Calls Grow for Starmer Exit Timeline

Modified: Tuesday, 12 May 2026 12:46 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Retreats as Calls Grow for Starmer Exit Timeline

The Pound to Dollar exchange rate (GBP/USD) has come under renewed pressure, retreating sharply from recent highs above 1.36 as political tensions surrounding Prime Minister Keir Starmer intensified.

Sterling weakened across global markets after reports that more than 60 Labour MPs are now backing efforts to force Starmer to set out a resignation timetable, while several ministers and parliamentary aides have reportedly withdrawn support. The growing political uncertainty has unsettled investors and added to wider concerns surrounding the UK economic outlook and elevated gilt yields.

GBP/USD Forecasts: Edges Above 1.36

The Pound to Dollar (GBP/USD) exchange rate dipped sharply to lows below 1.3560 in Asian trading on Monday before moving back above the 1.36 level as overall risk appetite held steady and the dollar was unable to make much headway. A slight easing of immediate political pressure also curbed Pound selling.

According to Scotiabank, the key area to watch is 1.37 and a break above here could lead to January highs at 1.3870.

Markets are watching the UK political situation, geo-political developments and US interest rate expectations very closely over the next few days.

Overnight, President Trump described Iran’s response to the US peace proposals as unacceptable which triggered a fresh increase in oil prices, but equity markets held steady.

According to Danske Bank; “Despite financial markets turning more positive this week in the anticipation of a deal between the US and Iran, we still think a protracted limbo is the most likely near-term scenario.”

Kenneth Broux, head of corporate research for FX and rates at Societe Generale commented on the resilience; “I think the reason for that may be the involvement of China. The summit with China and the U.S. later this week is, for me, the main event really.”

According to TD Securities the dollar outlook is more positive; “Factors that could weigh on the dollar have become more elusive after hawkish Fed dissents, resilient U.S. data and continued stalemate in the Middle East."

On Friday, the US reported a 115,000 increase in non-farm payrolls for April compared with consensus forecasts of around 65,000 while the unemployment rate held at 4.3%.

There was, however, a further decline in the number of people employed with a slide of over 1.2mn from last year as the participation rate also dipped again.

ING focussed on evidence of resilience; “With the US labour market so far holding up and the unemployment rate staying low, the Federal Reserve is going to have to sound cautious. Indeed, money markets have flipped back to considering Fed hikes towards the end of this year.”

Domestically, Prime MInister Starmer appears to have survived the immediate and intense pressure to resign as Labour leader following heavy Labour Party defeats in last week’s local elections.

There have, however, been calls for Starmer to set out a timetable for a succession and underlying tensions will continue. Markets will follow headlines closely and also take note of economic data and evidence of further weakness would increase political tensions

The 10-year yield also increased to just above 5.00% which will increase underlying concerns over the UK economy.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts