GBP/USD falls with Gorton & Denton by-election in focus
The pound is falling to 1.35 as attention turns to the polls in a key UK by-election, which could carry implications for Prime Minister Keir Starmer.
The vote today in the Gorton and Denton constituency was triggered by the resignation of former Labour minister Andrew Gwynne. A Labour Party loss could reignite speculation and questions over Starmer's leadership.
Why does this by-election matter? This by-election will be a valuable glimpse into how Labour is performing in a place the party won easily around 18 months ago. Surveys ahead of the vote suggest that both the Labour Party and the Green Party are now roughly equal, with Labour, if anything, slightly ahead.
The Prime Minister has already survived 1 attempted coup over the fallout from Mandelson's links to Jeffrey Epstein, but a third-place finish in this seat, one of Labour's safest, could make the Prime Minister deeply unpopular within his party
Third place could make PM Starmer and Chancellor Rachel Reeves’ positions more fragile. It's unlikely to be bad enough for Starmer to be pushed out so the imact on the pound will likely be limited.
No PM has ever had to resign after a poor by-election result, and no party wants a leadership campaign in the middle of an election campaign for parliaments in Scotland and Wales, as well as for councils in England.
Separately, on the monetary policy front, markets are increasingly expecting a rate cut from the Bank of England after softer employment data, cooling inflationary pressures, and following Bank of England governor Andrew Bailey's appearance before the Treasury Select Committee earlier in the week, during which he adopted a more dovish tone.
Separately, the US dollar is under pressure again, says major pairs dented by tariff uncertainty and concerns over Federal Reserve independence.
The Fed's 10% tariff went into effect on Tuesday after the US Supreme Court overturned most of Trump's reciprocal tariffs from last year. However, there are concerns that this rate will increase to 15%.
The U.S. economic calendar is relatively quiet, with jobless claims in focus ahead of tomorrow's PPI inflation report.
GBP/USD forecast – technical analysis
GBP/USD ran into resistance at 1.3870, a 2026 high, and fell back to find support at the 200 SMA at 1.3440. From here, the price pushed above the 50 SMA but hit resistance at the rising trendline, then fell back to test the 50 SMA support. The RSI is falling below 50.
Sellers will look to break below the 50 SMA and the 200 SMA. Below here, sellers could gain traction towards 1.3350.
Should the 50 SMA hold, buyers will look to rise above 1.36, the round number and rising trendline resistance. Above here, 1.37 comes into focus.
FTSE hovers around record highs
While the pound is struggling amid domestic political concerns, the FTSE 100 trades around record highs. The UK index is internationally focused, allowing investors to look past the local power struggles in government.
The UK index jumped over 1.1% yesterday, boosted by an 8% rally in HSBC and strong gains in miners. Today, HSBC is down 2%, and miners are falling around 3%, tracking metal prices lower.
Amid a quiet economic calendar, attention remains on corporate results. Rolls-Royce trading 7% higher after beating expectations and launching a new share buyback programme.
The FTSE 100 has rallied 8% year to date, outpacing the S&P 500, which has gained just 1.2% year to date. The UK index has benefited from investors rotating away from growth stocks and tech into value and cyclicals, and from geographical diversification away from the US amid policy uncertainty from the Trump administration.
FTSE forecast - technical analysis
The FTSE 100 has trended higher since April, rising to a record high of 10,830. The RSI has tipped into overbought territory, so there could be a period of consolidation or a move lower.
With blue skies above, buyers will look to extend gains towards 11,000 as the next logical target.
Support can be seen at 10,650, last week’s low, and below here, the rising trendline support around 10,500. Below here, 10,250 could offer minor support ahead of 10,100, the February low.
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