May 2026
Pound fell to 1.3424 against USD dragged down by the
weaker-than-expected retail sales data as consumers battled with elevated
prices. Consumers curtailed fuel purchases and discretionary spending as
surging energy costs and uncertainty stemming from the conflict in Iran weighed
on consumer sentiment. GBP weakened following a political crisis in the UK,
with the Prime Minister Keir Starmer under pressure to resign after Labor party
suffered significant losses in the local elections. Sterling is expected to
remain under strain until greater clarity emerges regarding the next prime
minister and the policy direction of any successor. Conversely, a de-escalation
in the Middle East would likely soften the USD against the GBP.
April 2026
GBP was supported although the expectations for further policy tightening is a little overstated. With no major economic data releases due, currency markets are expected to remain driven by geopolitical developments and their impact on energy prices, broader risk appetite and central bank expectations.
March 2026
Sustained GBP strength appears unlikely if the geopolitical conflict continues and energy supply disruption persists. UK faces large inflation problem and Bank of England is likely to be influenced by energy prices. A negative growth shock coming from higher energy prices (a deterioration in the balance of payments through a terms-of-trade hit) combined with elevated gilt yields will pose challenges to GBP and the UK’s fiscal outlook.
February 2026
GBP recorded a sharp loss against G10 currencies after the UK labour report showed softening in the job market. Uptick in the unemployment underscores that the BOE will cut when the evidence of the lower inflation is clearer. Market expectation favours next move in the second quarter than next cut in March.