GBP/USD remains weak around 1.3245 in Tuesday’s early Asian session. UK Prime Minister Keir Starmer has resigned, indicating a phase of political instability. The Fed maintains its current interest rates, yet indicates the possibility of a future increase. The GBP/USD pair experiences a decline, approaching 1.3245 in the early hours of trading on Tuesday in the Asian market. Political uncertainty in the United Kingdom continues to exert pressure on the British Pound against the US Dollar. The preliminary readings of the S&P Global Purchasing Managers Index from both the US and the UK are scheduled for release later on Tuesday.
The UK finds itself in the throes of yet another political crisis, as Prime Minister Keir Starmer tendered his resignation on Monday amid mounting pressure following Andy Burnham’s triumph in the Makerfield by-election last week. His Labour Party will now need to choose a new leader to guide the nation. “Markets will be focused on Burnham’s views on fiscal policy and whether there will be any relaxation of the current fiscal rules,” noted strategists from Commonwealth Bank of Australia, including Kristina Clifton. “A loosening in fiscal rules would likely be poorly received by the UK bond market,” and weigh on the pound, they said.
Markets are bracing for a potential rate hike in the United States later this year, following the newly appointed Federal Reserve Chair Kevin Warsh’s hawkish stance on inflation expressed during his inaugural policy meeting. This, in turn, could bolster the Greenback and serve as a headwind for the major pair. Markets have assigned an approximately 89% probability to a Federal Reserve rate hike in December, a notable increase from the 61% probability observed prior to last week’s FOMC meeting, as indicated by the CME FedWatch tool.