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GBP/USD – UK political uncertainty calls fresh leg of downfall ahead
- GBP/USD trades lower to near 1.3220 on renewed UK political uncertainty.
- US President Trump says UK PM Starmer could resign on failing to fix immigration and energy issues.
- The Fed is expected to deliver at least two interest rate hikes this year.
The GBP/USD pair recovers some of its early losses, but is still 0.1% down to near 1.3220 during the early European trading session on Monday. The pair remains under pressure amid renewed United Kingdom (UK) political uncertainty after comments from United States (US) President Donald Trump that Prime Minister (PM) Keir Starmer could resign on failing to fix immigration and energy issues.
“Keir Starmer will resign as Prime Minister of The United Kingdom. He failed badly on two very important subjects- IMMIGRATION AND ENERGY (OPEN NORTH SEA OIL!). I wish him well!,” US President Trump wrote in a post on Truth Social.
Meanwhile, calls from Labour lawmakers against PM Starmer continuing UK leadership have also accelerated, following Andy Burnham’s strong win in the Makerfield constituency in north-west England.
A Reuters report has shown that UK PM Starmer could decide as early as Monday whether to remain in office and fight a leadership contest or begin the process of stepping down.
Also, an upbeat US Dollar (US) due to increased expectations that the Federal Reserve (Fed) could deliver two interest rate hikes this year is also keeping Cable under pressure. According to the CME FedWatch tool, the odds of the Fed delivering at least two interest rate hikes this year is 58.5%, a sharp increase from 17.1% seen a week ago.
Hawkish Fed bets have strengthened following the first monetary policy announcement on Wednesday under new Chairman Kevin Warsh.
GBP/USD technical analysis
Bias: GBP/USD trades lower at around 1.3218 at press time. The pair maintains a bearish near-term tone as it holds below the 20-period Exponential Moving Average (EMA) at 1.3360. Also, a breakdown of the Symmetrical Triangle strengthens the bearish bias. The Relative Strength Index (RSI) near 34 hovers just above oversold territory, hinting at a dominant downside momentum.
Resistance: On the topside, initial resistance is seen at the broken rising trend-line region near 1.3250, followed by the 20-period EMA at 1.3360.
Support: On the downside, the pair could slide towards the November 25 low at 1.3096 if it resumes its decline below the June 19 low at 1.3163. The pair could extend its decline towards the psychological support at 1.3000 once it falls below 1.3096.
