Where we are: GBP/USD is currently trading around 1.2480, hovering near its weakest level since late April. The pair traded in a tight overnight range of 1.2460-1.2500, and is slightly below yesterday’s New York close of 1.2495. The 1.2450 level remains key support, with a break opening the door to further declines.
What’s driving it: Despite a better-than-expected UK GDP print this morning (0.6% q/q vs 0.1% prior), Sterling is struggling under the weight of mounting political uncertainty following Wes Streeting’s resignation and potential leadership challenge. This overshadows the positive macro data, highlighting the market’s sensitivity to domestic political risks. The Bank of England’s cautious stance, reflected in the recent 8-1 vote to hold rates steady, provides little support, as the MPC remains data-dependent and reluctant to commit to a cut path. Rising US Treasury yields, with the 2Y at 4% and the 10Y at 4.46%, are also weighing on Cable.
- UK GDP m/m came in at 0.5% vs. -0.1% forecast, indicating unexpected strength in the economy.
- Political uncertainty escalates with the likely leadership challenge against PM Starmer, increasing pressure on the Pound.
- CFTC data reveals a crowded short positioning in GBP, with net non-commercial positions at -63,908 contracts, a potential squeeze risk if positive news emerges.
NY session focus: All eyes are now on the 08:30 ET US Retail Sales data. Strong prints could further bolster the dollar and pressure Cable lower, while a miss could offer some respite. We’ll also be watching US Unemployment Claims at 08:30 ET. Key levels to watch are 1.2450 on the downside and 1.2520 as initial resistance. The trade that’s working is fading any Cable rallies into USD strength. The trade at risk is a short squeeze fuelled by weaker-than-expected US data. The pain trade is Cable breaking above 1.2550 and running towards 1.2600 as political risk recedes.