Sterling continued its descent on Friday and is likely to remain under pressure in the coming weeks as intensifying UK political instability and fiscal concerns clash with a more austere global inflation backdrop, particularly in the U.S.. Cable hit a fresh five-week low of 1.3329 during European trading. The currency is reeling from heightened domestic uncertainty following a bevy of high-profile Labour resignations from Prime Minister Keir Starmer’s government, including Health Minister Wes Streeting. Compounding sterling's woes is the resurgence of U.S. dollar strength. Recent above-forecast U.S. CPI and PPI data, coupled with climbing oil prices, have solidified a persistent inflation outlook. This shift has bolstered expectations for a Federal Reserve rate hike in Q4, fundamentally altering the relative global rate path. While the U.S. inflation spike may foreshadow similar pressures in the UK—raising BoE hike expectations for H2 2026—the immediate focus remains on narrowing Fed-BoE policy expectations.

Market sentiment is pivoting as the previously dovish 2026 Fed path, fueled by expectations that new Chair Kevin Warsh would follow Donald Trump’s preference for lower rates, loses traction. High oil prices necessitate a more hawkish stance to prevent an inflationary spiral.

Technically, GBP/USD faces a daunting climb. Resistance is clustered between the 200-DMA at 1.3426 and the 100-DMA at 1.3481, former support levels. Further gains would target the 21-DMA at 1.3526.

On the downside, support is critical at today's low of 1.3329, which aligns closely with the lower Bollinger band at 1.3323 and the daily cloud base at 1.3322. A break below these levels could signal a further acceleration of the current downtrend toward late-March lows below 1.32.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)