Sterling suffered its worst weekly drop since November 2024 last week as UK leadership challenges sent the pound and Gilts sharply lower. Hotter-than-expected US inflation data and a stronger dollar, added to the pressure. With UK unemployment, CPI and PMIs all due this week alongside fast-moving political developments, sterling faces a testing time ahead.
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Today's FX rates: 18 May 2026
| Currency pair | Rate |
|---|---|
| gbp usd | 1.3355 |
| eur usd | 1.1630 |
| gbp eur | 1.1484 |
Rates correct as of 12:10pm on Monday 18 May but may now have changed.
The Big 3
A deeper look at the performance of major currency pairs this week. Become a subscriber to receive the full reports.
Sterling sinks as markets price in a new political reality for UK
GBP/USD moved sharply lower last week, accelerating with the emergence of Andy Burnham as a potential challenger to the Labour leadership and Prime Minister. Concurrent dollar strength added to the pressure, with hotter-than-expected US inflation data pushing rate hike expectations for late 2026 materially higher. New Fed chair Kevin Warsh is due to start soon, and with oil still above $100, a dovish pivot looks unlikely.
EUR/USD pushed lower as dollar strength and growth concerns collide
EUR/USD declined sharply last week, driven almost entirely by dollar strength. ECB Chief Economist Lane warned of a persistent inflation overshoot requiring a more forceful policy response, but lacklustre eurozone growth, particularly in Germany, leaves the ECB in a difficult position. The Trump/Xi meeting fell short of expectations, adding to a softer tone in equities. Thursday’s eurozone PMIs are the key release this week, though the dollar is likely to remain the dominant driver.
GBP/EUR tilts in the euro’s favour as leadership uncertainty mounts
GBP/EUR finally broke lower as the political risk that markets had been shrugging off started to bite. The key question for the pair is now less about central bank divergence and more about who ends up leading Great Britain – and what that means for fiscal policy. The euro, meanwhile, is winning by default; not on its own merits, but because sterling has more to lose from here. A busy week of UK data and political developments should keep the pound in the driving seat for direction.
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Looking forward
Key dates for your calendar.
- Monday: China retail sales (0.2%) and industrial production (4.1%).
- Tuesday: UK jobs data. Canada CPI. Japan GDP. RBA meets and Australian consumer data.
- Wednesday: The Fed publishes its FOMC minutes. Eurozone CPI. UK inflation rate.
- Thursday: S&P Manufacturing and Services PMI in Germany and UK. US building and housing data. Japan balance of trade.
- Friday: Japan CPI. US consumer sentiment. UK retail sales. Gfk consumer confidence and Ifo business climate.
What we’re talking to our clients about
IFX Payments is service led. Here are some of the conversations we’re having:
- UK political uncertainty
- Oil prices and ongoing middle east standoff
- Other inflationary pressures
The contents of this article do not constitute financial advice and are provided for general information purposes only. While the content is based on information believed to be accurate at the time of publication, no guarantee is provided.