GBP/USD: Corrective pullback underway – OCBC

Pound Sterling (GBP) fell, alongside Gilts on signs of division within Labour party. GBP was last at 1.3671 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks remain somewhat skewed to the downside

"A total of 49 rebel Labour MPs voted against the second reading of the Welfare Reform Bill – basically to scrap the cuts to welfare spending. To avoid defeat of the bill, PM Starmer was forced to do a U-turn, saying it would not change personal independence payment (Pip) rules until it had time to consider the review's conclusions."

"This puts pressure on Chancellor Reeves' spending plans, as potential savings of around £5bn will now be delayed or lost entirely. There was also rumour that Reeves may lose her job as Chancellor though PM Starmer later told BBC that Reeves would remain in the job for 'a very long time to come'."

"Bullish momentum on daily chart is fading while RSI fell. Risks remain somewhat skewed to the downside though we noted that a large part of the corrective move has taken place (in line with our caution from FX Weekly). Next support at 1.3580 (21 DMA), 1.3470 (50 DMA). Resistance at 1.3690, 1.3750 levels."