The GBP/USD pair struggles to build on the overnight modest bounce from the 1.3445 area, or the weekly low, and oscillates in a narrow band during the Asian session on Friday. Spot prices currently trade just below the 1.3500 psychological mark, nearly unchanged for the day, and seem vulnerable to slide further.
The Gorton and Denton by-election, held on February 26, has become a focal point of political drama in the UK amid allegations of illegal voting and a tight contest between Labour, Reform UK, and the Green Party candidates. This, along with the Bank of England (BoE) easing expectations, acts as a headwind for the British Pound (GBP) and the GBP/USD pair.
During his testimony before the Parliament’s Treasury Committee earlier this week, BoE Governor Andrew Bailey signaled that there is scope for rate cuts amid the expectation that inflation will return to the 2% target. This marks a significant divergence in comparison to reduced bets for more rate cuts by the US Federal Reserve (Fed) and caps the GBP/USD pair.
Traders trimmed their bets for aggressive policy easing by the US central bank after minutes from the January FOMC meeting showed that the Fed is in no hurry to cut interest rates further. Moreover, officials discussed the possibility of raising rates if inflation does not cool. This keeps the US Dollar (USD) close to the monthly high and favors the GBP/USD bears.
Moving ahead, there isn’t any relevant market-moving economic data due for release from the UK on Friday, though comments from BoE’s Chief Economist Huw Pill could influence the GBP. Later during the North American session, traders will take cues from the US Producer Price Index (PPI), which would drive the USD and provide some impetus to the GBP/USD pair.
Source: https://www.fxstreet.com/news/pound-sterling-struggles-to-lure-buyers-amid-uk-political-drama-boe-easing-bias-202602270454
