The GBP/USD pair is presently experiencing a decline, trading around 1.3685 during the European session on Tuesday. The Pound Sterling is experiencing a slight decline against the US Dollar due to political uncertainties in the United Kingdom and increasing anticipations of imminent rate reductions by the Bank of England.
UK Prime Minister Keir Starmer faced a significant test of his leadership as Scottish Labour leader Anas Sarwar called for his resignation in light of the fallout from the Jeffrey Epstein scandal. Starmer remains resolute in his efforts to strengthen his position, stating that “after having fought so hard for the chance to change our country, I’m not prepared to walk away from my mandate and my responsibility to my country or to plunge us into chaos as others have done.” The exchange rate between the British pound and the US dollar is experiencing a drop, nearing 1.3685 in the early hours of the European session on Tuesday. UK Prime Minister Starmer has clearly expressed that he will not be stepping down, regardless of the rumors that are circulating. On Tuesday, attention will turn to the US December Retail Sales data, which comes before the NFP report.
The Bank of England seems ready to make another move on interest rates, as recent predictions suggest that inflation could fall below the 2% target by April. Market participants are raising their expectations for a possible decrease in the Bank of England’s interest rates, which could happen as soon as March. This might result in a decrease in the Cable. “We still anticipate that the next rate reduction will take place in March.” “After that, we anticipate the BOE will implement a lengthy pause before continuing with policy normalization in early 2027 (we project a terminal rate of 3.00% by mid-2027),” remarked Dani Stoilova.
Concerning the USD, the Retail Sales figure for December is anticipated to be published later on Tuesday. The attention will be on the delayed jobs report for January, scheduled for release on Wednesday. The consensus among market participants anticipates an increase of 70,000 in Nonfarm Payrolls for January, while the Unemployment Rate is expected to remain steady at 4.4%. Signs of a weakening US labor market and softer inflation could put downward pressure on the Greenback, possibly alleviating the losses of the major pair.