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British Pound falls as US inflation surprises, UK political turmoil weighs

  • US inflation accelerates to 3.8% in April, above market expectations of 3.7%.
  • Donald Trump’s comments about the US-Iran ceasefire fuel risk aversion and support the US Dollar.
  • British Pound remains under pressure amid rising political uncertainty in the UK ahead of GDP data.

GBP/USD declines around 1.3525 on Tuesday at the time of writing, down 0.62% on the day, as the US Dollar (USD) benefits from renewed demand following stronger-than-expected US inflation data and a more cautious market mood.

The Bureau of Labor Statistics (BLS) reported on Tuesday that inflation, as measured by the Consumer Price Index (CPI), accelerated to 3.8% YoY in April from 3.3% previously, above market expectations of 3.7%. On a monthly basis, the index increased by 0.6%, in line with forecasts. Core inflation rose to 2.8% annually from 2.6%, surpassing the 2.7% forecast.

At the same time, weekly ADP data showed that US private employers added an average of 33K jobs per week over the four weeks ending April 25, signaling a slight improvement in labor market momentum.

The data support the US Dollar, as investors assess that more persistent inflation could limit the Federal Reserve’s (Fed) room to ease monetary policy in the coming months. The US Dollar Index (DXY) therefore rises toward 98.30 following the release.

The Greenback is also benefiting from renewed safe-haven demand. Market sentiment deteriorated after United States (US) President Donald Trump stated that the US-Iran ceasefire is “on life support.” According to CNN, several members of his administration are now reportedly considering the possibility of resuming major military operations more seriously, reviving geopolitical concerns.

On the other side, the British Pound (GBP) remains pressured by mounting political tensions surrounding UK Prime Minister Keir Starmer following Labour Party's heavy losses in local elections. According to several reports, 78 Labour Members of Parliament have called for Starmer to step down, close to the threshold required to trigger a formal leadership challenge.

Reuters also reports that markets fear a potential successor could adopt a more expansionary fiscal policy stance, which could further deteriorate the United Kingdom’s (UK) public finances. ING noted that a political risk premium is beginning to emerge for GBP, while Commerzbank believes that a chaotic political transition could add further pressure on the British currency.

Investors are now awaiting the preliminary UK Gross Domestic Product (GDP) figures for the first quarter, as well as Industrial Production and Manufacturing Production data due on Thursday.

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.32%0.58%0.22%0.21%0.29%0.14%0.34%
EUR-0.32%0.25%-0.09%-0.14%-0.04%-0.20%0.02%
GBP-0.58%-0.25%-0.36%-0.40%-0.30%-0.45%-0.24%
JPY-0.22%0.09%0.36%-0.04%0.04%-0.10%0.09%
CAD-0.21%0.14%0.40%0.04%0.09%-0.06%0.13%
AUD-0.29%0.04%0.30%-0.04%-0.09%-0.14%0.04%
NZD-0.14%0.20%0.45%0.10%0.06%0.14%0.19%
CHF-0.34%-0.02%0.24%-0.09%-0.13%-0.04%-0.19%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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