GBP/USD Falls Below 1.3500 on UK Political Turmoil as US PPI Approaches
The Pound Sterling plunged below the key 1.3500 support against the US Dollar amid renewed UK political uncertainty and ahead of the US Producer Price Index (PPI) release. The technical breach was accompanied by higher selling volumes during the London session; the 50-day moving average has crossed below the 200-day average and RSI readings are in oversold territory. Immediate support clusters sit near 1.3480, with stronger support at 1.3400 and 1.3300–1.3350; resistance now lies around 1.3520–1.3540.
Political drivers include disputes over budget policy, stalled regulatory legislation, leadership speculation, and post‑Brexit trade negotiations—factors that widened UK CDS spreads by ~15 basis points and pushed Sterling options-implied volatility to a three-month high. Analysts note that political risk complicates the Bank of England’s rate outlook. The upcoming US PPI (13:30 GMT) is the next major catalyst; a hotter-than-expected reading would likely strengthen the US Dollar and put further downward pressure on GBP/USD. Markets currently price about a 65% probability of a Fed cut by June, but that is data-dependent.
For traders: monitor UK political headlines, UK risk-premium metrics, and the US PPI print. Key technical levels to watch are 1.3480 (near-term order cluster), 1.3400, and 1.3300–1.3350 on the downside, with 1.3520–1.3540 as immediate resistance. The convergence of domestic political risk and US inflation data will likely determine near-term direction for GBP/USD.
Bearish
The article outlines a clear confluence of factors that point to near-term downside pressure on GBP/USD. Renewed UK political instability has increased risk premia (widening CDS spreads and higher options-implied volatility) which typically weakens risk-sensitive currencies like the Pound. Technically, the decisive break below the 1.3500 psychological level, a 50/200-day moving average death cross, and oversold momentum indicate bearish momentum with limited immediate support until the 1.3400–1.3300 area. The pending US PPI adds a second catalyst: a stronger-than-expected reading would likely strengthen the US Dollar and deepen Sterling losses. Historically, political shocks (e.g., Brexit-related moves) have caused sharp Sterling depreciation and elevated volatility; traders reacted with risk-off positioning and stops that exacerbated moves. In the short term, expect continued volatility and potential further depreciation if political headlines remain negative or US inflation surprises. In the medium term, recovery would require either stabilising UK politics or clear US inflation softness; absent those, compressed interest-rate differentials and elevated risk premia suggest a sustained weaker bias for the Pound. For crypto markets specifically, a weaker Pound versus the Dollar can result in modest FX-driven flows into USD-pegged assets and may increase caution among UK-based crypto traders, but direct crypto fundamentals remain neutral unless risk sentiment shifts materially.