GBP/USD Turns Red as UK Political Uncertainty Intensifies!
GBP/USD experienced selling pressure in the Asian session on Friday (May 15), weakening to approach the 1.3370 area after previously hovering around 1.3365. The pound's weakening occurred amid growing political uncertainty in the UK and worsening risk-off sentiment, which tends to support the US dollar.
The main source of pressure came from domestic UK political dynamics. Health Minister Wes Streeting reportedly resigned, citing a loss of confidence in Prime Minister Keir Starmer's leadership, amid internal turmoil within the Labour Party following poor results in local elections in England and political developments in Scotland and Wales.
This political instability also reportedly overshadowed the stronger-than-expected UK first-quarter GDP release. In this context, the market appears to be viewing political risk as the dominant factor, so the improved growth data was not enough to shift the short-term downward bias for the pound.
Externally, the US dollar received support after this week's US inflation data, namely PPI and CPI, came in hotter than expected. These conditions prompted the market to readjust expectations regarding the Fed's interest rate path, reinforcing the assumption that interest rates could remain higher for longer.
Comments from Fed officials further reinforced the central bank's focus on inflation risks, with the Kansas City Fed emphasizing inflation as the biggest risk to the economy, which is considered resilient, while the New York Fed stated that it does not yet see a need to change its interest rate policy amid uncertainty related to the war in the Middle East. Going forward, market participants will monitor developments in British politics, inflation dynamics, and Fed communications, as well as changes in global risk sentiment that could influence the direction of GBP/USD. (asd)
Source: Newsmaker.id
