GBP/USD: UK politics and fiscal worries weigh – BBH

FXStreet Insights Team FXStreet

Brown Brothers Harriman’s (BBH) Elias Haddad notes that GBP/USD has risen above pre-war levels as United Kingdom (UK) local and Scottish elections test Prime Minister Keir Starmer’s leadership. Haddad warns that a strong Green Party showing could push policy leftward and worsen fiscal concerns, with UK nominal Gross Domestic Product (GDP) growth running below 10-year gilt yields, posing a drag on the Pound (GBP).

Election risks and weak fiscal backdrop

"GBP/USD has rallied above pre-war levels. Today’s local and Scottish elections will test British Prime Minister Keir Starmer’s leadership."

"Starmer’s Labour Party is poised to get trounced when results start coming in early Friday morning."

"A strong showing from the Green party risks pulling the Labour government further to the left, raising concerns about UK fiscal credibility."

"Alarmingly, UK nominal GDP growth is tracking below 10-year gilt yields, making stopping debt growth very difficult which is drag on GBP."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD fills weekly bearish gap vs USD; upside seems capped amid UK political chaos

The GBP/USD pair climbs back to the 1.3235 region during the Asian session and fails the weekly bearish gap opening amid a modest US Dollar downtick, though the upside potential seems limited.

EUR/USD declines to near 1.1450 amid concerns over progress for US-Iran peace deal

The EUR/USD pair drifts lower to around 1.1460 during the early Asian session on Monday. Concerns about progress for the US-Iran peace deal and expectations of higher US interest rates boost a safe-haven currency such as the US Dollar against the Euro. European Central Bank President Christine Lagarde is set to speak later on Monday.

Gold clings to recovery gains near $4,200; US-Iran talks eyed

Gold has staged a solid rebound in the mid-Asian session on Monday, closing the bearish opening gap. The US Dollar pauses its upside amid renewed progress on the US-Iran peace talks after Qatar and Pakistan said that the US and Iran agreed to establish a de-confliction cell involving Lebanon, with mediator support to ensure termination compliance.

Breaking: Iran closes the Strait of Hormuz amid ceasefire deal violation

Iran says it is closing the Strait of Hormuz after accusing the United States (US) and Israel of violating the ceasefire. According to Iran, the decision came over the continued Israeli strikes in Lebanon. The Iranian Revolutionary Guard Corps Navy issued a warning to all vessels: "Do not approach the Strait of Hormuz; otherwise, your security will be jeopardized."

Bitcoin recovers, Ethereum clings to support, XRP consolidates

Bitcoin, Ethereum and Ripple begin the week on a steadier footing after correcting by nearly 4%, 2% and 6%, respectively, in the previous week. BTC is attempting a modest recovery, trading above $64,500 on Monday, while ETH continues to defend the crucial $1,700 support level.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.