The British pound remains unaffected by local election results

The British pound experienced an uptick on Friday, outperforming a faltering U.S. dollar in anticipation of the American employment statistics set to be released later that day. Meanwhile, the outcome of local elections in the UK had little impact on the currency’s performance.

Investors are keenly awaiting the release of the U.S. nonfarm payrolls data at 1230 GMT, seeking insights into the Federal Reserve’s potential rate cut timeline. This follows Federal Reserve Chair Jerome Powell’s recent remarks suggesting that interest rates may need to stay high for an extended period, although he dismissed the possibility of further increases.

Domestically, the Labour Party secured a parliamentary seat in Blackpool South and took over several councils, dealing a significant blow to the incumbent Conservative Party. Despite this decisive win setting the stage for the local election results over two days ahead of this year’s national election, the sterling remained stable.

Jane Foley, Rabobank’s forex strategy lead, commented, “The pound has shown little response to the outcomes of the recent elections in England and Wales. The Conservative Party’s poor performance was anticipated and has not caused surprise. Today’s rise in the pound is primarily driven by a widespread decline in the U.S. dollar.”

The pound was last valued 0.15% higher against the dollar at $1.2555.

Post-payroll data, attention will shift to the Bank of England’s upcoming meeting for indications of potential policy relaxation, according to Foley. While the Bank of England is expected to maintain the interest rate at 5.25% on Thursday, the possibility of a rate reduction in the subsequent meeting is being considered as inflation moves closer to the target.

Market predictions now indicate a 65% likelihood of a Bank of England rate cut in June.

In the interim, British service sector companies have reported the most robust increase in activity in nearly a year for April, despite facing renewed cost pressures. This survey result, which will be closely monitored by Bank of England policymakers, saw the S&P Global UK Services Purchasing Managers’ Index (PMI) climb to 55.0 in April, marking its highest point since May 2023 and a slight increase from the initial estimate of 54.9. A PMI above 50 signifies expansion.

In comparison to the euro, the pound remained relatively unchanged at 85.60 pence.