June 23 (Reuters) - Cable has been in a steady downtrend since late April, and the technical picture suggests the selling pressure has further to run — with a key moving average now acting as the last line of defence before a significantly deeper decline. The British pound did move higher versus both the euro and dollar on Monday and early Tuesday following Prime Minister Keir Starmer's resignation announcement. But these gains proved to be short-lived and sterling has come under fresh pressure Tuesday. A resurgent dollar, a hawkish Federal Reserve, and lingering global risk aversion have all conspired to leave sterling with few friends in the market.
Sterling dropped 0.3% versus the dollar to $1.3180 in early Monday trading but closed the session at 1.3250. However, the pound has already lost around 3% since February as Starmer's leadership came under increasing threat from Labour party challengers.
From a technical standpoint, the rot set in during May, when cable broke below its 10-week moving average — a level that had previously acted as reliable support. That break confirmed sellers had wrested control, and the pair has drifted lower ever since. Sterling is now testing the 100-week moving average at $1.3192, a structurally significant level. A sustained close beneath it would open the door to the 200-week moving average at $1.2782 — a move of roughly 3% from current levels.
Starmer's resignation marks a significant political development, but the muted reaction in sterling suggests markets had largely anticipated the outcome. After weeks of speculation over his future, investors appear to view the announcement less as a shock and more as the formal conclusion of a process already priced into UK assets.
More importantly, GBP/USD is currently being driven by forces beyond Westminster. The resignation changes little about the fundamental drivers of the currency pair. If anything, sterling's inability to rally on an orderly political transition highlights the dominance of monetary policy and interest-rate expectations in current FX pricing.
Bears should not grow complacent, however. A recovery back
above the 10-week moving average at $1.3419 would signal the
selloff has exhausted itself and shift the near-term bias back
to neutral. Until political uncertainty in the UK gets settled,
sterling will face continued pressures.
GBP/USD weekly chart:
(Peter Stoneham is a Reuters market analyst. The views expressed
are his own)
