Hotter-than-expected US inflation data and UK political turmoil push the pair to multi-day lows near 1.3500.
GBP/USD dropped 0.7% on Tuesday, retreating from session highs near 1.3650 to test 1.3500 before a slight rebound to 1.3540. The decline followed stronger-than-expected US April CPI data, with headline inflation at 3.8% YoY and core at 2.8% YoY, both above forecasts.
UK political instability added pressure, as over 70 Labour MPs called for Prime Minister Keir Starmer’s resignation after local election losses. UK gilts sold off, with 30-year yields hitting 5.81%, the highest since 1998, amid concerns over potential fiscal loosening. Wednesday’s focus shifts to BoE hawk Catherine Mann, who may push for rate hikes if inflation expectations remain elevated.
Thursday’s UK GDP data, expected at 0.6% QoQ, will close the week’s economic calendar. US PPI data remains in focus after the CPI surprise, with markets assessing Fed policy implications.