GBP/USD dips to approximately 1.3485 during the early Asian session on Friday. The Gorton and Denton by-election heightens political uncertainty in the UK, putting pressure on the Pound Sterling. Market participants will pay close attention to the results of the Gorton and Denton by-election, as well as the release of the US January PPI report later on Friday. The GBP/USD pair declines to approximately 1.3485 in the early Asian session on Friday. The Pound Sterling weakens against the Greenback amid rising UK political uncertainty surrounding the Gorton and Denton by-election.
The Gorton and Denton constituency in Manchester was contested on Thursday. The counting of the results is ongoing, with expectations set for completion on Friday between 3:00 am and 4:00 am. This situation represents a crucial challenge for UK Prime Minister Keir Starmer, given the prevailing discontent within the party and his declining approval ratings. Political risks in the UK may pose a threat to the GBP relative to the USD in the short term. “A defeat for the Labour party could increase pressure on Keir Starmer’s position as prime minister and would add to Labour party concerns over their sliding popularity ahead of the local elections in May,” stated Lee Hardman.
Conversely, the uncertainty surrounding US policy could limit the potential decline for the major pair. Last week, the US Supreme Court determined that the emergency powers law invoked by Trump to implement tariffs did not provide the legal basis for his policy regime, as reported. The President of the United States has enacted a new 10% global tariff, leveraging legislation that permits the imposition of import taxes for a duration of 150 days without the need for congressional approval. The following day, Trump indicated a potential increase to 15%.
Market participants will monitor the upcoming US January Producer Price Index report, scheduled for release later on Friday. Any indications of inflation in the US exceeding expectations could postpone interest rate reductions by the US Federal Reserve and strengthen the USD in the short term.