Scotiabank analysts Shaun Osborne and Eric Theoret note the Pound is slightly softer versus the Dollar, underperforming most G10 currencies despite hawkish comments from BoE’s Mann hinting at reluctance for further easing. Stabilized UK–US spreads offer some support, but UK politics and downside protection priced in options, including rising odds of PM Starmer’s departure, continue to pressure GBP/USD ahead of Q4 GDP.

Pound pressured by political risk premium

"Comments from the BoE’s Mann, a known hawk, highlighted the positive contribution of import prices to CPI – suggesting some reluctance to further easing from at least one member of the MPC."

"UK-US spreads appear to have stabilized, offering the GBP some fundamental support as rate expectations have found a floor in the aftermath of last week’s dovish BoE hold."

"UK politics remain a drag for the pound and the options market continues to price a higher premium for protection against downside risk, reflecting ongoing concerns about PM Starmer’s leadership."

"Polymaket odds of a departure are climbing, despite Monday’s expression of support from Starmer’s cabinet ministers and potential rivals."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)