THE Pound has fallen to its lowest level in a year after Sir Keir Starmer resigned as Prime Minister today with “immediate volatility to the UK financial markets”.
Starmer announced his resignation this morning in a statement outside 10 Downing Street – he said every decision he has made in office has been about “putting the country I love first”.
Starmer will remain in post until Labour chooses a new leader, which he’s asked the party’s governing body to ensure happens “before Parliament returns in September”.
Andy Burnham is widely expected to replace Starmer as Labour’s new leader after becoming the Member of Parliament for Makerfield last week.
The Pound has fallen to $1.32, its lowest level against the US Dollar since November 2025, and €1.15, its lowest level against the Euro since February this year.
A weaker Pound can make imported goods, overseas travel and foreign currency purchases more expensive, while businesses with international suppliers may face higher costs, experts say.
The FTSE 100 has held flat near 10,357 while Government bond yields are stable for now – suggesting that markets don’t anticipate an immediate fiscal collapse.
Sterling has fallen to its lowest level in around 12 months
Prem Raja, Head of Trading Floor at Currencies 4 You, said investors are facing an uncertain month or two ahead.
He added: “Following Prime Minister Keir Starmer’s resignation, Sterling has fallen to its lowest level in around 12 months as investors react to a period of renewed political uncertainty. While the transition appears likely to be orderly, with Starmer remaining in office until Labour selects a new leader, markets generally dislike uncertainty and will be looking for clarity on the future direction of government policy.
“For the Pound, the key issue is not necessarily who becomes the next Prime Minister, but whether the change in leadership increases the likelihood of a General Election or significant policy shifts over the coming year. Until investors have greater certainty, Sterling could remain under pressure and experience increased volatility.
“For ordinary people, a weaker Pound can make imported goods, overseas travel and foreign currency purchases more expensive, while businesses with international suppliers may face higher costs.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said the Pound has been hit.
He added: “Like all before him, Starmer’s resignation has brought immediate volatility to the UK financial markets, injecting a fresh ‘political risk premium’ into the Pound Sterling. The Pound bore the brunt of the shock, dropping to lows against the Euro and the US Dollar.
“Conversely, the FTSE 100 has held flat near 10,357 – its heavy concentration of multinationals with foreign revenues often acts as a natural buffer when the Pound weakens. Government bond yields remain stable for now, signalling that markets don’t anticipate an immediate fiscal collapse.
“A weaker Pound will push up import costs, keeping pressure on the cost of living. Furthermore, Starmer’s summer caretaker status triggers policy paralysis ahead of the UK-EU Summit on 22 July.”
Starmer’s resignation is a political earthquake
Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said the markets will be worried about what Burnham will bring to the leadership.
He added: “Starmer’s resignation is a political earthquake, and markets hate earthquakes. The Pound may not fall off a cliff, but it could certainly be pushed towards the edge if investors conclude Britain is swapping dull stability for Burnham-style socialism.
“The FTSE may get a short-term wobble too, especially banks, housebuilders and consumer stocks exposed to tax, wage and spending policy. For normal people, this matters because a weaker Pound feeds import costs, holiday money shrinks, and mortgage markets get twitchier if gilts sell off.
“Burnham’s ‘economy for everybody’ sounds warm, but the City will hear one question: who pays? If the answer is higher taxes, more borrowing and more intervention, confidence will be the first casualty.”
Michelle Lawson, Director at Fareham-based Lawson Financial, said the UK is a global laughing stock.
She added: “The markets will get the jitters and then recover. Until this country’s government gets a grip and listens to the electorate, and this chaos of seven prime ministers in 10 years is changed, we will be a global laughing stock.
“Meanwhile people in power are decimating the economy and public confidence.”
The markets will get the jitters and then recover
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said the market could reset with a new prime minister.
She added: “Starmer’s resignation would not automatically crash the Pound or the stock market. Markets do not panic because a Prime Minister leaves, they panic when they think there is no credible plan behind whoever comes next. The immediate reaction would likely be volatility.
“Sterling could weaken and gilt yields could rise if investors fear a messy leadership contest, higher borrowing or another round of unfunded promises. That matters because higher gilt yields feed into swap rates, borrowing costs and eventually mortgages. But there is another scenario. If the next leader brings a credible economic plan, fiscal discipline and a route to growth, markets may see a reset rather than a crisis.
“For normal people, politics becomes personal when it hits their mortgage, rent, pension, business costs, job security or tax bill. The Pound and FTSE are headlines. The real issue is whether this creates more uncertainty for people already trying to budget in an economy that still feels unstable.”
