GBP Steady As Gorton And Denton By-election Polls Open

The Pound US Dollar (GBP/USD) exchange rate was subdued on Thursday as investors focused on a vital UK by-election.

DAILY RECAP:

The Pound (GBP) initially edged lower on Thursday as attention turned to the high-profile by-election in Gorton and Denton, where voters cast their ballots in what has become a closely watched political contest.

Polls suggest the result is finely balanced, with the governing Labour Party, Reform UK and the Green Party all hovering at roughly 30% support. With no clear frontrunner, the race has heightened uncertainty around the UK’s political landscape.

For Sterling, the stakes extend beyond a single constituency. The vote is widely viewed as an important barometer of Prime Minister Keir Starmer’s authority, as he continues to face rumblings of dissatisfaction within his party alongside weakening approval ratings. A poor showing for Labour could intensify speculation over his leadership.

At the same time, the strong performance of Reform UK and the Greens hints at a broader fragmentation of traditional two-party dominance. The prospect of a more fractured political environment raised concerns about future policy direction and stability, leaving the Pound under pressure through Thursday’s session.

Meanwhile, the safe-haven US Dollar (USD) found its upside against the Pound somewhat limited as a risk-on market mood prevailed.

This even saw the ‘Greenback’ trim its gains as the European session unfolded, as upbeat investors sought higher-yielding, riskier assets.

Near-Term GBP/USD Forecast: US PPI to Dent the Dollar?

Looking forward, the only data release of note on Friday will be the latest US producer price index. Signs that factory gate inflation is easing could put some pressure on USD, if it prompts investors to rethink their expectations for Federal Reserve interest rate cuts.

As for the Pound, GBP movement may be driven by domestic political developments in the wake of the by-election. Signs of discontent among Labour MPs could put pressure on Sterling.

Meanwhile, risk appetite could remain a key factor for the Pound US Dollar exchange rate. A cheery market mood would likely support the Pound and weigh on the safe-haven Dollar. Conversely, if sentiment sours then USD could strengthen against GBP.