Expectations surrounding the UK Chancellor of the Exchequer selection boosted the pound, driving a rebound from its oversold condition against the dollar.
2026-06-26 14:39:22
The British pound rose slightly against the US dollar (GBP/USD) in early European trading on Friday, trading around 1.3200 . Recent developments in British politics improved market expectations for fiscal policy continuity, while a cooling of expectations for a US interest rate hike slowed the dollar's gains, providing an opportunity for a pound rebound.
Currently, the market is largely focused on the composition of the UK's future fiscal team. According to market sources, current Chancellor of the Exchequer Rachel Reeves is expected to leave office in the new government led by Andy Burnham, while former Health Secretary Wes Streittin is considered a leading candidate to succeed her. The market believes that if the new fiscal team can maintain relatively stable fiscal policies, it will help improve investor confidence in the UK economy, thus providing some support for the pound.
Market analysts point out that concerns surrounding political uncertainty in the UK have eased somewhat as expectations gradually strengthen that Andy Burnham will succeed Keir Starmer as Prime Minister. However, the UK economy still faces multiple challenges, including slowing growth, fiscal pressure, and inflation; therefore, the future trend of the pound will depend on the implementation of the new government's policies.
On the other hand, data released by the U.S. Bureau of Economic Analysis showed that the U.S. Personal Consumption Expenditures (PCE) price index rose 4.1% year-on-year in May, higher than April's 3.3% ; the core PCE price index, which the Federal Reserve closely monitors, rose 3.4% year-on-year, slightly higher than the previous value of 3.3% , reaching its highest level since October 2023. Although both data points met market expectations, they did not further strengthen market bets on a rapid rate hike by the Federal Reserve.
Meanwhile, following the signing of a preliminary peace agreement between the United States and Iran, international oil prices fell back to pre-conflict levels, leading the market to believe that inflationary pressures previously driven by energy prices may have reached a temporary peak. This shift prompted investors to moderately lower their expectations for further interest rate hikes by the Federal Reserve, and also caused the dollar index to retreat from its highs.
According to the CME Group's FedWatch tool, the market's expectation of a 25 basis point rate hike at the Fed's July meeting has fallen to 28.9% , down from 34.2% in the previous trading day; the probability of a rate hike at the September meeting has also decreased from 65.7% to 60.1% . The cooling of rate hike expectations has weakened the dollar's appeal, providing room for a rebound in the pound against the dollar.
Overall, the current exchange rate of the pound is mainly influenced by both domestic political factors in the UK and the performance of the US dollar. If UK fiscal policy remains stable and subsequent US economic data continues to support lower market expectations for interest rate hikes, the pound/dollar exchange rate is expected to recover further. Conversely, if US inflation strengthens again or the UK economy underperforms expectations, the exchange rate may still face downward pressure.
From a daily chart perspective, the GBP/USD pair has stabilized and rebounded after a previous pullback, currently trading around 1.3200 , maintaining an overall consolidation pattern. Short-term support is at 1.3150 ; a break below this level could lead to further declines towards the 1.3100 and 1.3050 areas. On the upside, key resistance levels are at 1.3250 , 1.3300 , and 1.3360 ; a break above 1.3300 could see the pair retest previous highs. Daily momentum has improved somewhat, but the trend still needs further confirmation.
From a 4-hour chart perspective, the exchange rate has regained its position above the short-term moving average, the MACD is gradually approaching the zero line, and the green momentum bars are continuously narrowing, indicating that the bearish momentum has weakened, and there is a possibility of a continued rebound in the short term. If it breaks through the 1.3250 resistance, it is expected to further challenge 1.3300 ; if it falls below the 1.3150 support again, it may retrace to around 1.3100. Overall, the short-term trend is mainly characterized by a slightly bullish bias within a range.
Editor's Summary : The UK Treasury's adjusted forecasts improved market risk appetite, providing some support for the pound. Meanwhile, the decline in international oil prices eased market concerns about persistently rising US inflation, cooling expectations for a near-term Fed rate hike, thus causing the dollar to lose some upward momentum. In the short term, the UK political situation, the new government's fiscal policy direction, and US economic data will remain the core factors influencing the pound's exchange rate against the dollar. If the UK policy environment stabilizes further and the dollar continues to decline, the pound/dollar exchange rate is expected to continue its recovery. However, overall, the volatility risks arising from changes in the global economy and monetary policy still need to be monitored.
Currently, the market is largely focused on the composition of the UK's future fiscal team. According to market sources, current Chancellor of the Exchequer Rachel Reeves is expected to leave office in the new government led by Andy Burnham, while former Health Secretary Wes Streittin is considered a leading candidate to succeed her. The market believes that if the new fiscal team can maintain relatively stable fiscal policies, it will help improve investor confidence in the UK economy, thus providing some support for the pound.
Market analysts point out that concerns surrounding political uncertainty in the UK have eased somewhat as expectations gradually strengthen that Andy Burnham will succeed Keir Starmer as Prime Minister. However, the UK economy still faces multiple challenges, including slowing growth, fiscal pressure, and inflation; therefore, the future trend of the pound will depend on the implementation of the new government's policies.
On the other hand, data released by the U.S. Bureau of Economic Analysis showed that the U.S. Personal Consumption Expenditures (PCE) price index rose 4.1% year-on-year in May, higher than April's 3.3% ; the core PCE price index, which the Federal Reserve closely monitors, rose 3.4% year-on-year, slightly higher than the previous value of 3.3% , reaching its highest level since October 2023. Although both data points met market expectations, they did not further strengthen market bets on a rapid rate hike by the Federal Reserve.
Meanwhile, following the signing of a preliminary peace agreement between the United States and Iran, international oil prices fell back to pre-conflict levels, leading the market to believe that inflationary pressures previously driven by energy prices may have reached a temporary peak. This shift prompted investors to moderately lower their expectations for further interest rate hikes by the Federal Reserve, and also caused the dollar index to retreat from its highs.
According to the CME Group's FedWatch tool, the market's expectation of a 25 basis point rate hike at the Fed's July meeting has fallen to 28.9% , down from 34.2% in the previous trading day; the probability of a rate hike at the September meeting has also decreased from 65.7% to 60.1% . The cooling of rate hike expectations has weakened the dollar's appeal, providing room for a rebound in the pound against the dollar.
Overall, the current exchange rate of the pound is mainly influenced by both domestic political factors in the UK and the performance of the US dollar. If UK fiscal policy remains stable and subsequent US economic data continues to support lower market expectations for interest rate hikes, the pound/dollar exchange rate is expected to recover further. Conversely, if US inflation strengthens again or the UK economy underperforms expectations, the exchange rate may still face downward pressure.
From a daily chart perspective, the GBP/USD pair has stabilized and rebounded after a previous pullback, currently trading around 1.3200 , maintaining an overall consolidation pattern. Short-term support is at 1.3150 ; a break below this level could lead to further declines towards the 1.3100 and 1.3050 areas. On the upside, key resistance levels are at 1.3250 , 1.3300 , and 1.3360 ; a break above 1.3300 could see the pair retest previous highs. Daily momentum has improved somewhat, but the trend still needs further confirmation.
From a 4-hour chart perspective, the exchange rate has regained its position above the short-term moving average, the MACD is gradually approaching the zero line, and the green momentum bars are continuously narrowing, indicating that the bearish momentum has weakened, and there is a possibility of a continued rebound in the short term. If it breaks through the 1.3250 resistance, it is expected to further challenge 1.3300 ; if it falls below the 1.3150 support again, it may retrace to around 1.3100. Overall, the short-term trend is mainly characterized by a slightly bullish bias within a range.
Editor's Summary : The UK Treasury's adjusted forecasts improved market risk appetite, providing some support for the pound. Meanwhile, the decline in international oil prices eased market concerns about persistently rising US inflation, cooling expectations for a near-term Fed rate hike, thus causing the dollar to lose some upward momentum. In the short term, the UK political situation, the new government's fiscal policy direction, and US economic data will remain the core factors influencing the pound's exchange rate against the dollar. If the UK policy environment stabilizes further and the dollar continues to decline, the pound/dollar exchange rate is expected to continue its recovery. However, overall, the volatility risks arising from changes in the global economy and monetary policy still need to be monitored.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
