Pound Stagnates, UK Political Crisis Weighs
The pound sterling stagnated in the European session on Monday (January 9th), failing to continue its previous slight gains. At 09:34 GMT, GBP/USD was hovering around 1.360, down slightly by around -0.12% (24-hour change).
What weighed on the pound wasn't just data, but also political noise. The resignation of Downing Street Chief of Staff Morgan McSweeney has made the market sensitive again to government stability issues—especially as the case involved a controversial decision regarding ambassadorial appointments. This is the type of headline that can make market participants reluctant to aggressively hold GBP.
On the other hand, the dollar is losing steam. The DXY fell to around 97.5, weakening -0.27%, as traders took the brakes ahead of a busy week of US data (jobs and inflation) and as risk-on sentiment began to return.
The immediate market focus now: the delayed US jobs report (Wednesday) and the CPI (Friday). Until these figures are released, the market will continue to "guess" when the Fed will become more dovish—and that's what's making the dollar volatile, while GBP/USD tends to be flat due to resilience in the UK's domestic issues.
From the central bank camp, comments from Fed officials also have the potential to further unsettle the dollar—some are leaning towards a relaxed interest rate stance, while others remain fearful of inflation rebounding. So for now, the big picture is this: the dollar is weakening, but the pound hasn't been able to fully capitalize due to its own political factors.
Source: Newsmaker.id
