The GBP/USD pair loses ground to near 1.3485 during the early Asian session on Friday. The Pound Sterling (GBP) weakens against the Greenback amid rising UK political uncertainty surrounding the Gorton and Denton by-election.
Manchester's Gorton and Denton constituency was held on Thursday. The result is still being counted and is expected on Friday between 3:00 am and 4:00 am GMT. This event is viewed as a significant test for UK Prime Minister Keir Starmer, amid internal party discontent and low approval ratings. Political risks in the UK could undermine the GBP against the USD in the near term.
"A defeat for the Labour party could increase pressure on Keir Starmer’s position as prime minister and would add to Labour party concerns over their sliding popularity ahead of the local elections in May,” said Lee Hardman, an analyst at MUFG.
On the other hand, US policy fog might cap the downside for the major pair. The US Supreme Court ruled last week that the emergency powers law used by Trump to impose tariffs did not authorize his policy regime, according to the BBC.
The US President responded by imposing a new 10% global tariff, using legislation that allows him to impose import taxes for 150 days without congressional approval. The next day, Trump threatened to raise it to 15%.
Traders will keep an eye on the US January Producer Price Index (PPI) report, which is due later on Friday. Any signs of hotter-than-expected inflation in the US may delay the US Federal Reserve (Fed) interest rate cuts and lift the USD in the near term.
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