Pound To Dollar Price Forecast: GBP Defends 11-Week Low As Starmer Resigns

The Pound to Dollar (GBP/USD) exchange rate traded in a narrow range at the start of the week as markets digested Prime Minister Keir Starmer’s resignation while ongoing uncertainty surrounding Middle East negotiations helped underpin the US Dollar.

At the time of writing, GBP/USD was trading at $1.3221, little changed on the day and hovering just above an 11-week low.

DAILY RECAP:

The Pound (GBP) came under pressure at the start of the week as investors reacted to confirmation that Keir Starmer would step down as Labour leader.

Ahead of the announcement, UK government borrowing costs moved higher as markets prepared for another change in political leadership and the uncertainty that often accompanies a transition of power.

However, Sterling recovered some lost ground after Starmer outlined a timetable for his departure and pledged to oversee an orderly handover.

The clearer succession process helped calm investor nerves and shifted attention towards the policy agenda of the expected frontrunner, Andy Burnham.

As a result, the Pound avoided a more pronounced sell-off despite the political backdrop.

Meanwhile, the US Dollar (USD) retained a firm tone after ending the previous week strongly.

The Greenback remained supported by uncertainty surrounding negotiations in the Middle East, with investors monitoring conflicting headlines regarding the future of US-Iran talks.

Tehran initially threatened to withdraw from negotiations and block access to the Strait of Hormuz following renewed tensions involving Israel and Lebanon.

However, comments from Iranian Foreign Minister Abbas Araghchi later suggested meaningful progress had been made towards reducing tensions, helping to stabilise broader market sentiment.

The mixed signals left the US Dollar trading within a relatively narrow range while maintaining most of its recent gains.

Near-Term GBP/USD Forecast: PMI Surveys in Focus

Attention now turns to the latest PMI surveys from both the UK and United States.

In the UK, economists expect manufacturing activity to ease slightly while the services sector is forecast to stabilise after slipping into contraction territory during May.

A weaker-than-expected set of readings could reinforce concerns about slowing economic momentum and place additional pressure on Sterling.

Investors will also monitor comments from Bank of England policymakers Swati Dhingra and Alan Taylor, both of whom are regarded as among the more dovish members of the Monetary Policy Committee.

For the US Dollar, the latest S&P Global PMI surveys may provide fresh insight into the resilience of the American economy.

While generally less influential than the ISM surveys, any significant surprise could still influence market expectations for future Federal Reserve policy.

Broader geopolitical developments are also likely to remain an important driver of GBP/USD price action.