The British Pound (GBP) experienced notable weakness on Tuesday, trading down 0.3% to near 1.3570 against the US Dollar (USD) during the European session, as the USD outperformed its peers amid a risk-off market mood and renewed geopolitical tensions between the United States and Iran [1]. The US Dollar Index (DXY) rose 0.25% to near 98.15, while S&P 500 futures traded 0.2% lower around 7,395, reflecting broader market caution [1]. Against the Euro, the Pound also lost ground, with the EUR/GBP cross gaining traction near 0.8665, driven by political instability in the UK and hawkish signals from the European Central Bank (ECB) [2].
UK Prime Minister Keir Starmer faced mounting pressure to set a date for his departure after significant losses for the Labour Party in recent elections. Although Starmer stated he would not resign, the resulting political uncertainty and rising UK gilt yields have contributed to localized pressure on the GBP [2]. Meanwhile, the Euro was supported by hawkish comments from ECB officials. Governing Council member Martin Kocher indicated there is no need to delay interest rate hikes if energy prices do not improve, and Executive Board member Isabel Schnabel suggested that the ECB could raise rates as soon as next month. Financial markets are now pricing in a 92% chance of a 25 basis point hike at the June meeting, with a total of three hikes anticipated by the end of 2026, according to Reuters [2].
Looking ahead, investors are awaiting key economic data releases. In the US, the Consumer Price Index (CPI) for April is expected to show headline inflation accelerating to 3.7% year-on-year from 3.3% in March, with the report due at 12:30 GMT [1]. In the UK, preliminary Q1 Gross Domestic Product (GDP) data will be released on Thursday, with expectations for a faster growth rate of 0.6% compared to the previous reading of 0.1% [1].
From a technical perspective, GBP/USD remains above the 20-day exponential moving average (EMA) at 1.3534 and the 50% Fibonacci retracement at 1.3520, maintaining a bullish bias despite the current pullback [1]. However, the 61.8% Fibonacci retracement near 1.3600 remains a key barrier for further gains [1].
CONCLUSION
The British Pound is under pressure due to both domestic political uncertainty and external factors such as a stronger US Dollar and hawkish ECB signals. Market participants are closely watching upcoming US inflation and UK GDP data for further direction. The overall sentiment remains cautious, with the GBP facing headwinds in the near term.