Sterling starts the week under pressure after GBP/USD fell around 1% following a recovery in the dollar. Cable is trading near 1.33, while GBP/EUR remains close to 1.15 after failing to break towards 1.16 last week.
Analysts warn that sterling may not yet be fully pricing the upcoming Makerfield by-election. The contest is drawing attention because Andy Burnham is expected to perform strongly. He is viewed as a left-leaning candidate, and markets may question how firmly he would support the UK’s fiscal rules. Any rise in political or fiscal uncertainty could weigh on the pound.
Burnham confirmed on Thursday that he would stand in the leadership election, which adds to the focus on the by-election. Reports suggest JP Morgan has taken a long EUR/GBP position before the vote, while betting markets put Burnham’s chances of winning Makerfield above 75%. This makes the political build-up important for sterling this week.
The dollar was the strongest driver of last week’s currency moves. The DXY rose close to 1%, taking its monthly gain to nearly 2%. The main catalyst was stronger US jobs data. The economy added 172,000 jobs in May, well ahead of expectations for 82,000, while the previous two months were revised higher by 93,000 in total.
That lifted the three-month average pace of job creation to 188,000. The figures support the view that the US economy remains resilient and make it harder for markets to price a sharp slowdown in 2026. This gives the dollar near-term support. However, a US-Iran peace deal and the reopening of the Strait of Hormuz could reduce oil and gas prices, ease inflation pressure and limit further dollar gains.
The euro remains under pressure against the dollar. EUR/USD opens the week just above 1.15, with US data, geopolitical uncertainty and dollar strength all acting as headwinds. Against sterling, however, the euro remains more rangebound. GBP/EUR has struggled to move above 1.16 this year, showing that investors have not yet found a strong reason to reprice the pair.
NZD has weakened over the past fortnight as global risk sentiment deteriorated. It is a risk-sensitive currency, so it usually performs better when equity markets are strong and investors are confident. Recent geopolitical tensions and higher oil prices have reduced risk appetite, contributing to a fall of nearly 2.4% against the US dollar over the past month.
GBP/NZD remains supported and has now moved above the key 2.30 level. This reflects continued pressure on NZD and a more constructive position for sterling against risk-sensitive currencies. A sustained move above 2.30 would strengthen the outlook for GBP/NZD, with that level now becoming important support in the weeks ahead.
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