British Pound falls as hot PPI, Starmer turmoil lift the US Dollar

• US PPI jumps to four-year high, lifting Treasury yields.
• Dollar gains as oil-driven inflation keeps Fed cuts distant.
• Starmer resignation rumors pressure Sterling before UK GDP data.

The British Pound posted losses of 0.19% in back-to-back bearish days after a red-hot US inflation report, piling pressure on UK Prime Minister Keir Starmer to resign from his job. The GBP/USD trades at 1.3513 after peaking at 1.3551.

Sterling weakens as US inflation shock and UK politics bite

Inflation continues to grab the headlines. High energy prices, due to stalled negotiations between the US and Iran to resolve the conflict, keep Oil prices above $100. Hence, central banks are positioning to hold interest rates higher for longer, prompting traders to buy the Greenback.

Producer inflation in the US hit its highest level in 4 years, up 6% YoY, exceeding March’s 4.3% rise. Excluding volatile items, the so-called Core Producer Price Index (PPI) expanded by 5.2% YoY, up from March’s 4%, crushing estimates of 4.3%.

Consequently, US Treasury yields shoot up, with the 10-year note up 2.5 basis points to 4.488%. The US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, is up 0.21% at 98.49.

As of today, money markets are pricing in the first Federal Reserve interest rate cut, expecting the central bank to keep rates unchanged. Data from Prime Terminal indicates that at the first meeting led by the new Chair —if confirmed by the US Senate—Kevin Warsh.

In the UK, some Labor MPs voted to oust Prime Minister Keir Starmer following the local election, in which his party suffered losses. Rumors that his health minister, Wes Streeting, is resigning to trigger a contest to replace him are exerting pressure on Sterling.

Meanwhile, 111 Labor MPs signed a statement of support for Starmer, saying that “This is no time for a leadership contest.”

Aside from this, GBP/USD traders are awaiting the release of UK GDP data on Thursday. In the US, jobless claims and Retail Sales will provide updates on the economy.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3518, holding a mild bullish bias as it stays above the clustered simple moving averages (SMAs) around 1.3430 while still trading below the descending resistance trend line that is now projected near 1.3620. The latest 14-day Relative Strength Index hovers close to the 50 line, suggesting balanced momentum and hinting that any immediate upside will likely depend on whether buyers can sustain the pair above the reclaimed moving average support.

On the topside, initial resistance is defined by the downward-sloping trend line break level around 1.3620, and a daily close above this barrier would open the way for a more sustained recovery. On the downside, the SMA cluster near 1.3430 acts as the first significant support, with the immediate price area around 1.3518 functioning as a nearby pivot that bulls will want to defend to keep the constructive tone intact.

(The technical analysis of this story was written with the help of an AI tool.)