Sterling may remain under pressure in the near-term as a volatile cocktail of domestic political instability and surging UK, and global, inflationary and growth pressures weigh on the currency's outlook.

The pound extended its slide today, again dipping into the daily Ichimoku cloud—which spans 1.3514 to 1.3322—and briefly testing critical support at the rising 100-day moving average currently at 1.3484. The currency remains firmly on the backfoot as markets grapple with heightened uncertainty over Prime Minister Keir Starmer’s hold on power following a report that his health minister was readying his resignation to try to trigger a leadership contest.

The political turmoil is exacerbating UK fiscal concerns with long-term gilt yields climbing to their highest levels since 1998 as traders fear a regime change could usher in a fresh wave of unfunded spending.

A challenging global macro landscape is compounding the pain. Persistent Middle East tensions have kept oil prices elevated above $100/bbl, fueling global inflation fears that were recently validated by hotter-than-expected U.S. CPI data.

Looking ahead, technical resistance is pegged at the 10-day moving average of 1.3567, just above today's high of 1.3549. Recently, bulls have been unable to maintain a foothold above 1.3600.

On the downside, a sustained break below the 100-DMA at1.3483 could see sterling drift toward the cloud base at 1.3322.

Next week’s UK CPI and PPI data will be pivotal. Another upside surprise could stoke hawkish BoE expectations, threatening UK growth prospects and inviting further GBP/USD weakness that could open the way toward late-March lows below 1.32.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)