Political turmoil, rate hike bets mounts pressure on GBP/USD – Price looks to 1.3300 handle

The British pound traded lower against the US dollar, dropping over 2% this previous week as leadership uncertainty and rate hike expectations weighed in. As of writing, the GBP/USD had exited a key level around 1.3400 and has exposed lower price levels.

The current UK government was shaken by a call for the British PM, Sir keir Starmer to be replaced after last week’s elections saw Labour party suffer losses while the Reform party gained momentum. In addition to that, some key government members have resigned their position with some MP’s now challenging for the leadership.

On the economic front, the recent rise in energy prices due to the war has seen the latest US inflation data for both consumers and producers surge for the month of April 2026, further sustaining the Fed’s narrative of keeping rates higher for longer with investors now anticipating a rate hike at the next policy meeting. This piled more pressure for the GBP as the US dollar pushed higher at the back of rate hike sentiments. Oil prices still remained elevated with the situation in the middle east still very much unchanged from the last meeting.

Technical outlook

The GBP/USD has has broken from a rising channel after failing to sustains its bullish move above the upper-resistance around 1.3600-1.3650. The price has also established a bearish Fair Value Gap (FVG) , leading to an impulsive selloff below key support at 1.3485.

Bearish scenario

Given the current momentum that has caused price displacement, the bears look to sustain the move towards the immediate support at 1.3300 which could experience a short- term retracement towards 1.3392 resistance. In a case where the support fails to hold, then we could see the price drift to the next major support at 1.3185 which happens to be a liquidity zone. Traders will need to see if the prices will make retracements towards 1.3390, 1.3485 or the bearish FVG near 1.3540 for an opportunity to go short. It is also important to note that further macros supporting the USD could see the price extend its bearish trend deeper into major levels.

Bullish scenario

Although the bias is clearly bearish following the heavy sell-off, buyers can still position themselves around demand zones which offer some short-term buy opportunities. With the price already close to the psychological support at 1.3300, traders should also note the Bullish FVG which sits around 1.3270-1.3300. A Hold above the Bullish FVG could see Buyers try to regain control and push towards 1.3390. Failure to rebound off this level(Bullish FVG) will leave buyer with no option but to reposition at 1.3185 major support level.