Pound Weakens Ahead of UK GDP
The British pound held steady at around $1.352. This figure has weakened from a near-two-month peak touched last week. Market sentiment is being weighed down by a combination of political uncertainty in the UK and the US-Iran negotiation deadlock, which is maintaining a global cautious bias.
Domestically, Prime Minister Keir Starmer's cabinet remains relatively intact despite several junior ministerial resignations, and Starmer has reiterated his intention to remain in office. However, pressure from several ministers and more than 80 Labour MPs for a leadership change continues after the poor results of local elections, raising concerns that fiscal policy could shift to a more expansionary direction to mitigate political pressure.
From a monetary policy perspective, the market is said to be pricing in nearly three Bank of England interest rate hikes by the end of the year. Repricing of interest rate expectations typically influences the GBP through the yield differential and inflation projections, but in the short term, political risk factors could restrain the pound's response even if interest rate expectations strengthen. The next focus will be on a series of economic data scheduled for release on Thursday, including first-quarter GDP. Data surprises have the potential to alter market perceptions of the Bank of England's policy space and increase or decrease pressure on the pound, particularly if they interact with the dynamics of political risk and still-fragile global sentiment. (asd)
Source: Newsmaker.id
