The British pound remains under pressure following increased political uncertainty in the United Kingdom triggered by the Prime Minister’s resignation. Investors are assessing potential shifts in the political and economic policy outlook after the head of government stepped down, including implications for fiscal spending, taxation policy, and economic support measures. The uncertainty surrounding the future direction of domestic politics is weighing on demand for sterling and prompting a more cautious stance among market participants.
Today’s focus will be preliminary UK PMI data. Forecasts suggest the services PMI may rise to 50.0 from 49.3, while the composite PMI is expected to increase to 50.6 from 49.7. The manufacturing PMI is projected at 53.5, slightly down from 53.9. If the data confirms signs of economic stabilisation, the pound could see short-term support after recent declines and partially offset pressure from political uncertainty.
GBP/USD
Last week, following meetings of the Federal Reserve and the Bank of England, GBP/USD broke key support at 1.3300. The pair also tested this year’s low at 1.3160. It is currently consolidating in the 1.3200–1.3240 range. Technical analysis suggests a potential rebound towards the recent support level at 1.3300. A move back above this level would be the first signal of easing downside pressure. However, weak UK macroeconomic data could trigger another test of 1.3160.
Key events for GBP/USD:
- Today at 11:30 (GMT+3): UK services PMI
- Today at 11:30 (GMT+3): UK composite PMI
- Today at 11:55 (GMT+3): speech by Sarah Breeden, Bank of England Financial Policy Committee member
GBP/CAD
Despite pressure on sterling following the Prime Minister’s resignation, weakness in the Canadian dollar has allowed GBP/CAD to hold up better than other sterling crosses. The pair retreated from this year’s high at 1.8800 but quickly found support at 1.8630. A retest of recent highs is possible. A firm break above 1.8800 could extend gains towards 1.8900–1.8920.
Key events for GBP/CAD:
- Today at 16:00 (GMT+3): speech by Bank of Canada Governor Macklem
- Today at 20:30 (GMT+3): speech by Bank of England MPC member Swati Dhingra
- Tomorrow at 14:15 (GMT+3): speech by Bank of Canada Deputy Governor Rogers
Overall, both pairs remain influenced by multiple factors: domestic political uncertainty in the UK, the impact of recent Bank of England and Federal Reserve decisions, and expectations ahead of key macroeconomic data releases. Today’s PMI figures will help determine whether the current consolidation resolves into a sterling recovery or continued downside pressure.
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