GBP Under Pressure as Starmer Faces Welfare Vote Showdown, Bailey in Focus

GBP Faces Double Risk: Welfare Vote and Bailey's Inflation Outlook

The British Pound (GBP) remains sensitive as the UK faces twin pressures: a pivotal welfare reform vote and remarks from BoE Governor Andrew Bailey. With EUR/GBP trading well bid, the market is closely watching whether today’s vote in Parliament signals deeper political instability.

BoE Rate Cut Expectations Weigh on Sterling

Markets have scaled back BoE rate hike expectations, now pricing in around 55bps of cuts by year-end. Governor Andrew Bailey’s comments today on the pace of disinflation—especially in average earnings and labour market dynamics—could reinforce or shift those expectations.

“Any dovish tone from Bailey could further undermine the Pound amid fragile political sentiment.”

Political Turmoil: Starmer’s Welfare Reform in Jeopardy

Prime Minister Keir Starmer is confronting a rebellion from his own backbenchers over controversial welfare reforms. The government has already made £4 billion in concessions, but passage of the bill remains uncertain.

A failure to pass the bill could hit both Sterling and UK gilts, triggering expectations of even more costly compromises.

EUR/GBP Eyes 0.86+ on Rejection Risk

The EUR/GBP pair could see a bullish breakout above 0.86 if today’s vote fails. Political instability and reduced fiscal space could compound Sterling’s downside, making the Euro a relative safe haven in this context.

Related on Tredu.com:

• BoE Rate Cut Bets and Sterling's Vulnerability
• UK Political Risks: What Traders Should Watch
• EUR/GBP Technical Outlook – Where Next?