GBP/USD falls 2.2% in June, worst month since July 2025

Sterling is on track for its steepest monthly decline in nearly a year as UK political uncertainty and a resurgent dollar drive the selloff.

The pound slid to 1.3182 per dollar on Friday, on track for a 2.2% monthly loss — its worst since July 2025 — as UK political turmoil and dollar strength drove the selloff.

Traders pointed to two factors behind the decline: speculation over a change in UK leadership that has clouded the economic outlook, and positioning ahead of US inflation, GDP and jobs data that could reinforce the case for the Federal Reserve to keep rates higher for longer. The dollar advanced against most major currencies this week, with the greenback gaining ground as global market volatility deepened and oil prices fell on demand concerns.

The selloff accelerated after the pound briefly edged higher midweek as markets assessed the UK finance minister's outlook, before reversing gains as political uncertainty resurfaced. Sterling has now lost ground in three of the past four weeks, with the 1.32 level giving way on Thursday as stop-loss orders were triggered. Trading volumes were elevated, reflecting the heightened uncertainty around both UK politics and the upcoming US data releases.

A sustained break below 1.32 opens the door toward 1.30, a level not seen since April, with the next major test coming from US GDP data due June 26 and the June jobs report on July 2. For UK-focused multinationals, a weaker pound boosts the value of dollar-denominated earnings but raises import costs at a time when inflation remains above the Bank of England's 2% target.

The Cross-Asset Picture

The pound's weakness was part of a broader dollar rally that pushed the US currency higher against most Group-of-10 peers. The euro slipped below 1.07 against the dollar, while the yen remained under pressure near the 160 level, keeping traders on alert for potential intervention from Japanese authorities. The US 10-year Treasury yield held near 4.35%, supported by expectations that the Fed will maintain its restrictive stance as it awaits more progress on inflation.

For commodity markets, a stronger dollar typically weighs on prices by making dollar-denominated goods more expensive for holders of other currencies. Brent crude fell toward $82 a barrel this week, while gold edged lower as the dollar's strength reduced the appeal of the precious metal as an alternative asset. The correlation between the dollar and risk assets has been particularly pronounced in June, with the MSCI World Index declining about 1.5% as the greenback strengthened.

Rate Expectations and the Path Forward

The currency's decline also reflects a broader shift in rate expectations. Markets have pared back bets on BoE rate cuts this year as sticky services inflation complicates the outlook, while Fed officials have signaled they need more evidence that inflation is sustainably moving toward 2% before easing policy. The next Bank of England meeting is scheduled for Aug. 7, where policymakers will have access to two more months of inflation and jobs data before making their next decision.

From a technical perspective, the 1.3182 close puts sterling below its 50-day moving average of around 1.3250, a bearish signal that could attract further selling. The next support level sits at 1.3050, the low from April, with a break below that opening the path toward 1.29.

This article is for informational purposes only and does not constitute investment advice.