Published: May 13th, 2026
Sterling enjoyed a sturdy April, supported by a recurring wave of corporate demand, strengthening domestic data and calmer global markets. But if history is any guide, forex analysts say investors shouldn't assume the good times will last.
Recent notes from Bank of America and Société Générale say May has a habit of disappointing Sterling bulls. Over the past 15 years, GBP has typically fallen against the US dollar during the month. This year, the arrival of seasonal weakness coincides with local elections and growing speculation over the future of UK Prime Minister Keir Starmer.
According to Bank of America (BofA), that seasonality has a straightforward explanation. Many UK-listed companies earn substantial revenues from overseas sales and repatriate foreign currency in the Spring so they can fund their dividend payments in Pounds. This creates genuine demand for Sterling, driven not by speculative enthusiasm but by the reliable rules of corporate accounting.
The effect can be significant. Like swallows returning to Capistrano, dividend flows arrive with a comforting rhythm and regularity. This year other factors added to the positive impact. Tensions in the Middle East eased, encouraging investors to take more risk. British economic data also leaned to the upside, lifting expectations for UK interest rates relative to those elsewhere in the G10.
Bank of America noted that Britain's economic surprise index outperformed that of every other major developed market in April. A stronger economy and steadier markets reinforced the usual seasonal tailwind.
Unfortunately for Sterling bulls, seasonality can cut both ways. BofA's analysis shows that May has historically been one of the pound's weakest months, especially against the US Dollar. Over the past 15 years, sterling has typically lost about 1% against the greenback during May.
The pattern repeats when GBP is paired against the Euro, though the effect is less severe. By contrast, Sterling tends to fare better against the Australian and New Zealand dollars, two currencies that are particularly sensitive to swings in global risk appetite.
The underlying logic is that market volatility often rises in May, reducing the Pound's appeal. A G10 currency that benefits when calm prevails can struggle when investors become more defensive.
An old stock-market adage advises investors to “sell in May and go away,” and BofA analysts say “May is unlikely to be forgiving.” For Sterling, there is more historical support for that maxim than its fans might care to admit.
This year, the calendar comes with the additional complication of politics. Local and devolved elections on May 7 produced heavy losses for Labour. Strategists at Société Générale argue that the poor showing could intensify questions about Starmer's leadership.
The prime minister has already faced sharp criticism over repeated policy missteps and internal disputes that look set to intensify. Electoral disappointment is already raising speculation about potential Starmer replacements.
ING says investors are increasingly alert to the possibility of a change at the top. A new prime minister, and perhaps a new chancellor, could herald looser fiscal policy and more government borrowing.
On Tuesday the Pound fell to ~ €1.1506 against the euro and to ~ $1.3515 against the dollar, leaving it roughly 0.7% lower on the day. Those aren't heavy moves, but they do suggest traders are paying closer attention to Westminster.
A more revealing signal may come from the gilt market, where prices of British government bonds dropped sharply, pushing yields higher.
Bond yields rose elsewhere too, partly because of higher oil prices. But British yields rose more than those of comparable countries, implying investors were demanding an additional premium to hold UK debt.
A note from Pepperstone said investors fear that a new government might loosen fiscal rules, increasing borrowing and adding to inflationary pressures. In such an environment, even bargain hunters may think twice before buying gilts.
That said, Britain is not reliving the autumn of 2022. The brief premiership of Liz Truss triggered a sharp sell-off in sterling and gilts after markets recoiled from a large package of unfunded tax cuts. Nothing of that scale is evident today.
The market reaction will depend in part on who emerges if Starmer is forced out. Health Secretary Wes Streeting is widely seen as a sensible centrist and a safe pair of hands. Investors would probably view his ascent with relative calm, on the assumption that he would preserve existing fiscal rules.
Others inspire less confidence in financial circles. Angela Rayner is regarded as the favourite by some observers. She has been embroiled in recent scandals related to her personal finances, however, and is associated with Labour's more interventionist wing. She regularly advocates for a more expansive role for the state.
Andy Burnham, another possible contender, has also argued for greater public spending. A shift towards looser fiscal policy would probably raise borrowing costs and weigh on sterling. Currency traders may not follow party conferences closely, but they understand arithmetic.
In the Spring, Sterling can occupy an awkward position in global markets. It is neither a classic safe haven like the Greenback nor a high-yielding risk currency like the Aussie. Instead, it often trades as a hybrid, benefiting when growth expectations improve but suffering when volatility rises or domestic politics becomes noisy.
That makes the pound especially vulnerable when seasonal weakness and political uncertainty coincide. April offered a reminder of how supportive conditions can lift Sterling. May could deliver the opposite lesson.
For investors and corporates with significant foreign-exchange exposure, this may be a moment to review hedging plans. For FX traders it is a reminder that currencies are not governed by economic data alone. Sometimes dividends, elections and the collective mood of governments can matter just as much.
The pound climbed in April on a combination of predictable flows and favourable sentiment. Whether it can hold those gains through May will depend on whether Britain's politics proves more stable than its seasonal patterns suggest.
