• Burnham succession concerns keep UK Gilt markets cautiously priced.
• US PMIs beat forecasts, reinforcing Dollar exceptionalism narrative.
• BoE’s Taylor backs unchanged rates as neutral-rate debate grows.

The Pound Sterling dives over 0.40% on Tuesday as risk appetite shifts sour, as the recently sworn-in MP Andy Burnham prepares to succeed Keir Starmer, who lasted two years at the job. At the time of writing, the GBP/USD trades at 1.3195, after reaching a daily high of 1.3259.

GBP/USD drops as UK political risk meets US exceptionalism

The US Dollar continued to edge higher throughout the day, hitting a new yearly high in the US Dollar Index (DXY). The DXY, which measures the performance of the buck’s value against a basket of six currencies, is up 0.34% at 101.34.

On Monday, the UK Prime Minister Keir Starmer resigned, paving the way for an orderly succession. Meanwhile, UK GILTS’ yields remain subdued, an indication of caution amongst investors, who are concerned that Burnham’s government will pursue further spending, exerting pressure on fiscal policy.

In the US, President Donald Trump revealed that Iran agreed to nuclear inspections, though Tehran denied those claims. Iran’s ambassador to the UN, Ali Bahreini, said there has been “good progress” in the talks, but warned that five parts of the initial deal must be fulfilled before discussions begin on the nuclear program and the IAEA's role in it.

US exceptionalism continues to underpin the Greenback amid expanding business activity, according to S&P Global. The Manufacturing PMI rose from 55.1 to 55.7, crushing estimates of 54.7, while the Services PMI rose from 50.7 to 51.3, exceeding forecasts of 51.0.

Fed funds futures indicate there's an over 85% probability of a quarter-point rate increase by September.

Across the pond, Bank of England (BoE) MPC member Alan Taylor said it is appropriate to keep rates unchanged, as the Bank Rate is 75 basis points above his estimate of neutral.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3198 with a bearish near-term tone, holding below a dense cluster of the 50-, 100- and 200-day Simple Moving Averages (SMAs) grouped around 1.3451, which now act as a cap on rebounds. The pair also remains contained beneath the broader downward resistance trend line derived from the 1.3869 area, while the Relative Strength Index (14) at roughly 33 drifts toward oversold territory, suggesting persistent but not yet extreme selling pressure.

On the downside, initial support is seen near the rising structural trend line originating around 1.3159, where previous pullbacks have found demand. On the topside, any recovery would first need to challenge the SMA cluster around 1.3451, and only a sustained break higher would open the way toward the broader descending trend resistance linked to the 1.3869 region.

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