Forex News: Pound Falls Amid U.K. Political Uncertainty, BoE Rate

Pound Falls Amid U.K. Political Uncertainty, BoE Rate Cut Speculations

(RTTNews) - The British pound weakened against other major currencies in the European session on Tuesday, amid political unrest in the United Kingdom (UK) and growing anticipation of imminent rate cuts by the Bank of England (BoE).

Due to the aftermath from the Jeffrey Epstein incident, Scottish Labour leader Anas Sarwar called on UK Prime Minister Keir Starmer to resign, posing a serious challenge to his leadership.

Starmer claims that "after having fought so hard for the chance to change our country, I'm not prepared to walk away from my mandate and my responsibility to my country or to plunge us into chaos as others have done." He is battling to support his claims.

New estimates suggest that inflation will ease below the 2% target as early as April, bringing the Bank of England (BoE) extremely close to lowering interest rates once more.

In anticipation of a rate cut by the BoE, which might happen as early as March, traders increase their wagers. This could therefore add to the sterling's downside.

European stocks were subdued, as investors digested mixed earnings updates and looked ahead to the release of key U.S. retail sales, inflation and jobs data this week for clues on the Federal Reserve's rate trajectory.

In the European trading today, the pound fell to nearly a 3-month low of 1.0461 against the Swiss franc, from early high of 1.0500. The next possible downside target for the pound is seen around the 1.03 region.

Against the euro, the U.S. dollar and the yen, the pound edged down to 0.8720, 1.3664 and 212.18 from early highs of 0.8700, 1.3697 and 213.73, respectively. If the pound extends its downtrend, it is likely to find support around 0.88 against the euro, 1.35 against the greenback and 211.00 against the yen.

Looking ahead, U.S. NFIB business optimism index for January, U.S. ADP weekly employment data, U.S. retail sales data, export and import prices for December, U.S. Redbook report and U.S. business inventories for November are slated for release in the New York session.

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