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British Pound softens as UK political turmoil, hawkish Fed bets weigh

British Pound softens as UK political turmoil, hawkish Fed bets weigh

FXStreetFXStreet2026/05/19 03:00
By:FXStreet

The GBP/USD pair loses ground to near 1.3415 during the Asian trading hours on Tuesday. The British Pound (GBP) edges lower against the Greenback amid UK political turmoil. Traders will take more cues from the UK employment report, which is due later on Tuesday. 

UK Prime Minister Keir Starmer is facing a major leadership crisis following poor local election results on May 7, triggering a wave of high-level government resignations and severe market volatility. UK gilt yields have spiked to a 28-year high amid fiscal worries, exerting some selling pressure on the Cable sentiment.

The International Monetary Fund (IMF) on Monday raised its growth forecast for the UK economy this year but warned that further "domestic uncertainty," at a time when political instability is engulfing ‌the government, could hit spending and investment.

On the USD’s front, hotter-than-expected US inflation data have driven hawkish Federal Reserve rhetoric, lifting the US Dollar (USD). Traders in the fed funds futures market are pricing in a 35.0% chance that the US central bank will raise interest rates by 25 basis points (bps) by year-end, according to the CME FedWatch tool. 

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