British Pound slides to fresh low since April vs bullish USD amid UK political crisis

The GBP/USD pair attracts some follow-through selling for the third straight day and weakens further below the 1.3200 mark, hitting a fresh low since April during the Asian session on Friday. Spot prices remain on track to register heavy weekly losses, and the fundamental backdrop suggests that the path of least resistance remains to the downside.

The British Pound (GBP) continues with its relative underperformance in the wake of lingering domestic political risks, which, along with a bullish US Dollar (USD), validates the near-term negative outlook for the GBP/USD pair. Greater Manchester Mayor Andy Burnham cleared a path to attempt to oust British Prime Minister Keir Starmer after winning a parliamentary seat in northern England on Friday. In his victory speech, Burnham said the result could be a "turning point" for British politics and told his party that this was a final chance to change direction.

Meanwhile, traders have scaled back expectations for more aggressive interest rate hikes by the Bank of England (BoE) following the release of softer inflation figures earlier this week. Furthermore, the US-Iran peace deal eased concerns about the energy shock, endorsing the view that the BoE will hold interest rates steady. This is seen as another factor undermining the GBP. The USD, on the other hand, stands firm near its highest level since late March amid the US Federal Reserve's (Fed) more hawkish tilt, signaling the possibility of at least one rate hike by the year-end.

On the geopolitical front, US Vice President JD Vance canceled his planned trip for talks with Iran in Switzerland, saying that the meeting wasn’t yet finalized. Adding to this, Israeli air strikes in Lebanon threaten to unravel the US-Iran deal. This further benefits the safe-haven USD and backs the case for an extension of the GBP/USD pair's steep downfall from the weekly swing high, near the 1.3460 region. This, in turn, suggests that any attempted recovery could be seen as a selling opportunity as traders now look to UK monthly Retail Sales data for a fresh impetus.