The pound has come under pressure as speculation mounts that Sir Keir Starmer is set to imminently announce plans to step down.
Sterling dropped 0.3% to 1.319 US dollars in morning trading on Monday and was 0.1% down at 1.152 euro.
The pound has already lost around 3% since February as Sir Keir’s leadership has come under increasing threat from Labour party challengers.
It comes as Andy Burnham – the former Greater Manchester mayor – is due to make his return to Westminster on Monday, having won the Makerfield by-election last week, paving the way for him to mount a leadership bid.
Financial markets were otherwise in wait-and-see mode, with the FTSE 100 Index down just over five points at 10357.88.
UK Government bonds – which will also be watched closely for any reaction to a change at the top of Government – held steady, with yields largely flat for both 10-year and 30-year gilts, standing at 4.845% and 5.54% respectively.
Susannah Streeter, chief investment strategist at the Wealth Club, said: “The pound remains under pressure as political chop and change is back on the agenda in the UK.”
She said gilt yields, while having recovered from levels seen at the worst of the Iran conflict, remain higher than international peers.
Gilt yields move counter to the value of the bonds, which means their prices fall when yields rise.
“Investing in UK assets continues to carry a risk premium given the bouts of political instability seen since Brexit, and there is little sign of that easing,” Ms Streeter added.
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