GBP/USD has shown a recovery, currently trading near 1.3175 during the Asian session on Thursday. UK Prime Minister Keir Starmer resigned on Monday, resulting in an abrupt upheaval in UK politics. Traders will monitor the upcoming US PCE Price Index report for May, scheduled for release on Thursday. The GBP/USD pair has regained some of its previous losses, approaching 1.3175 during the Asian trading hours on Thursday. However, the potential upside for the major pair may be constrained due to political instability in the UK and increasing expectations of interest rate hikes in the US this year. Traders are anticipating the release of the US May Personal Consumption Expenditures inflation data on Thursday, seeking new momentum.
UK Prime Minister Keir Starmer resigned on Monday, plunging the nation into yet another political crisis. Starmer resigned amid significant pressure after Andy Burnham’s success in the Makerfield by-election last week. His Labour Party will now need to choose a new leader to guide the nation. Market participants will pay close attention to the potential implications of Burnham’s policy framework. Experts cautioned that Burnham’s favoured expansionary fiscal approach, elevated taxation, and augmented gilt issuance might exert pressure on the British Pound against the US Dollar.
The US PCE Price Index report for May will be the focal point on Thursday. The headline PCE is anticipated to demonstrate an increase of 4.1% year-over-year in May, up from 3.8% in April. The core CPE inflation is anticipated to rise by 3.4% year-over-year in May, compared to the previous figure of 3.3%. Any indications of softening inflation in the US may weaken the Greenback and provide support for the major pair.
Meanwhile, market participants are reevaluating the timing of potential US interest rate increases following the Federal Reserve’s hawkish indication. Markets are currently reflecting a probability of approximately 34.2% for a 25 basis points hike at the July meeting, an increase from 8.5% just a week prior. For September, the probability stands at 66.4%, rising from 29.1%, as indicated by the CME FedWatch tool.