Political turmoil in the UK, coupled with rising expectations of a hawkish stance from the Federal Reserve, caused the pound to continue its low-level consolidation against the dollar.
2026-06-23 13:40:32
The British pound continued its decline against the US dollar (GBP/USD) during Tuesday's Asian trading session, falling to around 1.3240 , a new recent low. A sudden deterioration in the UK's domestic political situation, coupled with rising market expectations of further monetary tightening by the Federal Reserve, jointly pressured the pound's performance.
News reports indicate that British Prime Minister Keir Starmer announced his resignation on Monday. This follows a major political blow to the Labour Party in last week's Mekfield by-election, with Andy Burnham's victory fueling calls for leadership changes within the party. Under sustained pressure, Starmer ultimately decided to resign, plunging British politics back into uncertainty.
As the ruling party enters a leadership transition phase, markets are beginning to reassess the direction of future fiscal policy. Investors are concerned that the new leadership may adjust the existing fiscal framework, thereby increasing public spending and putting more pressure on the UK's fiscal deficit. Some market analysts point out that whether future fiscal policy continues to maintain strict budgetary discipline will be a crucial factor determining the performance of the UK financial markets. If fiscal rules are significantly relaxed, the UK government bond market may face additional pressure, thereby weakening international investors' willingness to allocate assets to the pound.
Amid escalating political uncertainty, risk premiums for UK assets have shown signs of rising. In the foreign exchange market, funds tend to avoid currencies with policy uncertainty, which is a significant reason for the recent continued pressure on the pound. Meanwhile, interest rate expectations in the US are continuously strengthening the dollar's advantage. Last week, the Federal Reserve kept the federal funds rate unchanged at 3.50%-3.75% , but its latest interest rate forecasts and speeches by new Chairman Kevin Warsh both released clearly hawkish signals.
The market believes the Federal Reserve remains vigilant about inflation risks and may take further tightening measures in the coming months. As a result, US Treasury yields have remained high, and the dollar index is near its highest level in the past year. According to the CME FedWatch tool, the market now expects the probability of a Fed rate hike in December to have risen to approximately 89% , significantly higher than the 61% before last week's policy meeting. This rapidly rising expectation of a rate hike has driven continued capital inflows into the dollar, putting widespread pressure on major non-US currencies, including the British pound.
Furthermore, the market is awaiting the release of preliminary S&P Global Purchasing Managers' Index (PMI) data for the UK and the US later in the day. If US economic activity continues to show resilience while the UK economy performs weakly, the fundamental gap between the UK and US economies could widen further, reinforcing the dollar's advantage over the pound. From the current market structure, UK political risk, the Federal Reserve's hawkish stance, and the overall strength of the dollar remain the core factors dominating the pound's exchange rate against the dollar. In the short term, without new positive news, the pound may continue to face downward pressure.
From a technical perspective, the GBP/USD pair has broken below its previous consolidation range on the daily chart, establishing a downward trend. The price continues to trade below major moving averages, indicating an overall bearish market. The MACD indicator is below the zero line, with the green histogram expanding, reflecting the dominance of bearish forces. Key resistance levels to watch are 1.3300 and 1.3380. Failure to regain a foothold above 1.3300 would likely limit any rebound; further resistance lies around 1.3450 . Support levels to watch are 1.3200 , 1.3150 , and the psychological level of 1.3000 .
From a 4-hour chart perspective, the exchange rate remains within a clear downward channel. The MACD lines are below the zero line, indicating weak short-term rebound momentum. The current price has broken below the previous key support area, showing that bears still hold the initiative. If the 1.3200 level is breached, it may further test the 1.3150 area; if it can recover the 1.3300 resistance, it may alleviate short-term downward pressure. Technically, until a valid break above 1.3300 is achieved, the exchange rate is expected to trade with resistance on rallies.
Editor's Summary : The UK political landscape has undergone another major shift, with the Prime Minister's resignation triggering market concerns about the stability of fiscal policy, becoming a significant factor dragging down the pound's performance. Meanwhile, the strengthening of hawkish expectations from the Federal Reserve is pushing the dollar to maintain its strength. In the short term, the pound/dollar exchange rate still faces dual pressures from political risks and interest rate differentials. Investors should pay close attention to the policy direction following the formation of the new UK leadership, the performance of UK and US PMI data, and subsequent policy signals from the Federal Reserve. These factors will determine whether the exchange rate can break free from its current weakness.
News reports indicate that British Prime Minister Keir Starmer announced his resignation on Monday. This follows a major political blow to the Labour Party in last week's Mekfield by-election, with Andy Burnham's victory fueling calls for leadership changes within the party. Under sustained pressure, Starmer ultimately decided to resign, plunging British politics back into uncertainty.
As the ruling party enters a leadership transition phase, markets are beginning to reassess the direction of future fiscal policy. Investors are concerned that the new leadership may adjust the existing fiscal framework, thereby increasing public spending and putting more pressure on the UK's fiscal deficit. Some market analysts point out that whether future fiscal policy continues to maintain strict budgetary discipline will be a crucial factor determining the performance of the UK financial markets. If fiscal rules are significantly relaxed, the UK government bond market may face additional pressure, thereby weakening international investors' willingness to allocate assets to the pound.
Amid escalating political uncertainty, risk premiums for UK assets have shown signs of rising. In the foreign exchange market, funds tend to avoid currencies with policy uncertainty, which is a significant reason for the recent continued pressure on the pound. Meanwhile, interest rate expectations in the US are continuously strengthening the dollar's advantage. Last week, the Federal Reserve kept the federal funds rate unchanged at 3.50%-3.75% , but its latest interest rate forecasts and speeches by new Chairman Kevin Warsh both released clearly hawkish signals.
The market believes the Federal Reserve remains vigilant about inflation risks and may take further tightening measures in the coming months. As a result, US Treasury yields have remained high, and the dollar index is near its highest level in the past year. According to the CME FedWatch tool, the market now expects the probability of a Fed rate hike in December to have risen to approximately 89% , significantly higher than the 61% before last week's policy meeting. This rapidly rising expectation of a rate hike has driven continued capital inflows into the dollar, putting widespread pressure on major non-US currencies, including the British pound.
Furthermore, the market is awaiting the release of preliminary S&P Global Purchasing Managers' Index (PMI) data for the UK and the US later in the day. If US economic activity continues to show resilience while the UK economy performs weakly, the fundamental gap between the UK and US economies could widen further, reinforcing the dollar's advantage over the pound. From the current market structure, UK political risk, the Federal Reserve's hawkish stance, and the overall strength of the dollar remain the core factors dominating the pound's exchange rate against the dollar. In the short term, without new positive news, the pound may continue to face downward pressure.
From a technical perspective, the GBP/USD pair has broken below its previous consolidation range on the daily chart, establishing a downward trend. The price continues to trade below major moving averages, indicating an overall bearish market. The MACD indicator is below the zero line, with the green histogram expanding, reflecting the dominance of bearish forces. Key resistance levels to watch are 1.3300 and 1.3380. Failure to regain a foothold above 1.3300 would likely limit any rebound; further resistance lies around 1.3450 . Support levels to watch are 1.3200 , 1.3150 , and the psychological level of 1.3000 .
From a 4-hour chart perspective, the exchange rate remains within a clear downward channel. The MACD lines are below the zero line, indicating weak short-term rebound momentum. The current price has broken below the previous key support area, showing that bears still hold the initiative. If the 1.3200 level is breached, it may further test the 1.3150 area; if it can recover the 1.3300 resistance, it may alleviate short-term downward pressure. Technically, until a valid break above 1.3300 is achieved, the exchange rate is expected to trade with resistance on rallies.
Editor's Summary : The UK political landscape has undergone another major shift, with the Prime Minister's resignation triggering market concerns about the stability of fiscal policy, becoming a significant factor dragging down the pound's performance. Meanwhile, the strengthening of hawkish expectations from the Federal Reserve is pushing the dollar to maintain its strength. In the short term, the pound/dollar exchange rate still faces dual pressures from political risks and interest rate differentials. Investors should pay close attention to the policy direction following the formation of the new UK leadership, the performance of UK and US PMI data, and subsequent policy signals from the Federal Reserve. These factors will determine whether the exchange rate can break free from its current weakness.
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