Sterling sentiment stabilises as Labour leadership race takes shape, though traders remain slightly bearish

• Bearish sterling sentiment softens as Andy Burnham moderates spending stance and Starmer holds firm in leadership race
• 52% of sterling trading volume was in short positions last week, down from a peak of 70% three weeks prior
• On an individual client basis, sentiment is split 47/53 long-short

Bearish sentiment on the pound is easing, with 52% of trading volume going short last week – down from a peak of 70% three weeks prior – according to data from investing and trading platform IG.

The shift comes as the Labour leadership contest begins to take shape, with Andy Burnham moderating his stance on spending and Keir Starmer showing no signs of stepping back.

The political uncertainty continues to influence sterling trading activity, though total GBP/USD volumes – both long and short – fell last week, with short volumes down 27% and long volumes down 10% week-on-week. On an individual client basis, sterling sentiment leans short, with 53% of clients going short and 47% long over the last week.

IG Sterling Sentiment Tracker

Data on all UK clients trading GBP/USD from 18.05.2026-24.05.2026

Speaking on the data, Rich McDonald, Market Analyst at IG, said: “Markets were clearly concerned that whoever occupies Number 10 by the end of the summer could be governing from a weakened position, or be perceived as less committed to fiscal discipline than their predecessor.

“That concern has eased somewhat, with less trading volume to the short side on GBP last week, after Andy Burnham moved to reassure bond markets that he would stick to the existing fiscal rules – like a schoolchild summoned to the headmaster’s office and told to promise they will behave.

“Alongside the gilt market, the pound is often one of the first pressure points when confidence in the UK outlook begins to deteriorate. The scale of short positioning suggests traders were using sterling as the cleanest and most liquid way to hedge against further political instability. That short volume betting against Sterling has since reduced back towards more normal levels over the past week.

“Looking ahead, sentiment could shift again as we approach the Makerfield by-election, which is shaping up as an early test of the Labour leadership narrative. Should Andy Burnham formally enter the race, traders may have their fingers poised over the execute button once more. Any leadership contest brings renewed uncertainty around the UK’s fiscal direction, and sterling is likely to remain highly sensitive as the political picture becomes clearer.”

About the data

Data collected between 18–24 May 2026 is based on IG client positioning and trading activity across GBP/USD and the FTSE 100, including the proportion of long versus short positions, alongside changes in short-selling volumes and activity levels.