Sterling Faces Critical Thresholds Amid UK Political Turmoil

Sterling is under pressure as political uncertainty rises in the UK after the prime minister’s resignation. Market participants are evaluating how the leadership change might affect fiscal and tax policies, as well as economic stimulus measures. The unclear outlook for domestic politics is dampening demand for the pound and encouraging a more cautious approach.

Attention turns to the UK’s preliminary PMI figures. Analysts expect the services PMI to edge up to 50.0 from 49.3 and the composite PMI to rise to 50.6 from 49.7, while manufacturing PMI is forecast at 53.5, down marginally from 53.9. Should the data indicate economic stabilization, sterling may gain short‑term relief from its recent slide and counter some of the political‑driven pressure.

GBP/USD

After the recent Federal Reserve and Bank of England meetings, GBP/USD slipped below the 1.3300 support level and touched this year’s low near 1.3160. The pair is now trading sideways between 1.3200 and 1.3240. Technical indicators point to a possible bounce back toward 1.3300; a break above that level would signal diminishing downward pressure. Conversely, disappointing UK economic data could push the pair back toward 1.3160.

Key events for GBP/USD:

• Today at 11:30 (GMT+3): UK services PMI
• Today at 11:30 (GMT+3): UK composite PMI
• Today at 11:55 (GMT+3): speech by Sarah Breeden, Bank of England Financial Policy Committee member

GBP/CAD

Although sterling has weakened after the prime minister’s resignation, a softer Canadian dollar has helped GBP/CAD outperform many other sterling crosses. The pair retreated from its yearly high of 1.8800 but quickly found support around 1.8630. A retest of recent highs is possible, and a decisive break above 1.8800 could push the pair toward the 1.8900‑1.8920 range.

Key events for GBP/CAD:

• Today at 16:00 (GMT+3): speech by Bank of Canada Governor Macklem
• Today at 20:30 (GMT+3): speech by Bank of England MPC member Swati Dhingra
• Tomorrow at 14:15 (GMT+3): speech by Bank of Canada Deputy Governor Rogers

Both pairs are shaped by a mix of factors: UK domestic political uncertainty, the fallout from recent Bank of England and Federal Reserve decisions, and anticipation of upcoming macroeconomic data. Today’s PMI releases will indicate whether the current consolidation leads to a sterling rebound or further downside.

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