The GBP/USD exchange rate dropped to around 1.3300 during early European trading, marking its lowest point in over five weeks. This decline in the British pound appears to stem from considerable selling pressure linked to ongoing political instability in the UK, rising gilt yields, and heightened geopolitical tensions.
A leadership challenge is brewing for UK Prime Minister Keir Starmer from Greater Manchester Mayor Andy Burnham, especially after Labor’s recent loss in local elections.
Starmer’s leadership has come under scrutiny, particularly following the resignation of several ministers. Analysts from Jefferies suggest that a “managed exit” for Starmer is likely, with Burnham positioned to possibly take over as the next prime minister.
This potential leadership shift in the UK has led to an increase in gold yields, as there are expectations that a new leader may adopt more lenient fiscal policies. Currently, the yield on the UK 10-year government bond has climbed nearly 3% to almost 5.19%, the highest since the subprime crisis.
In a related development, tensions between the United States and Iran have escalated again after President Donald Trump issued a warning on Truth Social, suggesting serious repercussions for Iran if a deal isn’t reached soon.
GBP/USD technical analysis
As of now, GBP/USD stands around 1.3300. The pair has recently lost its previous upward trend and remains below the 20-day exponential moving average (EMA) of 1.3483, maintaining a bearish outlook in the short term.
The Relative Strength Index (RSI) is just above the oversold level at 36.8, which indicates that while downward pressure persists, the immediate selling momentum isn’t extreme.
Looking for support, the next key level to watch is the earlier uptrend line near 1.3213, which might invite buyers aiming to halt the decline. However, if the price moves below this line, it could lead the pair towards 1.3100.
On the other hand, the first resistance level can be found near the 20-day EMA at 1.3483, and a daily close above this point is necessary to start alleviating the current bearish sentiment.
