GBP/USD consolidates recent losses to 1.3120 amid doubts over Conservatives’ majority
|- GBP/USD pulls back from three-day low, still carries a 0.5% loss.
- YouGov’s MRP model increases the fears of a hung parliament.
- Tory candidates keep getting criticized, eyes on US CPI, Fed meeting for now.
GBP/USD pulls back from the recently flashed three-day low to 1.3122 during Wednesday’s Asian session. The pair plummeted after YouGov’s latest poll based on the MRP model suggested that the ruling Conservatives will struggle for the majority after December 12 elections in the United Kingdom (UK).
The latest YouGov MRP outcome increases doubts over the ruling Conservatives’ parliamentary majority after Thursday’s majority as the poll predicts 339 seats for the Tories versus 359 prior forecasts. The poll also says that the opposition Labour Party will grab 231 seats, an addition of 20 seats from November 27 prediction, after the election.
Read: Breaking: Cable trades heavy on hung/tighter YouGov polls
This means a close call for a hung parliament in the UK after the election, which in turn raises fears for the Prime Minister (PM) Boris Johnson’s Brexit deal. The main agenda behind calling this snap election by the Tory leader was to get a quick go through the Parliaments on his Brexit deals with the European Union. However, a hung parliament will defy his cause and could raise troubles for the cable traders.
Not only the polls but the recent criticism of the Conservative candidates, including the PM, over various instances have been highlighting the fears of a surprise outcome.
Read: UK Election Preview: GBP bulls to hold their horses
Analysts at TD Securities say, “With GBP up sharply in recent weeks, we think our base case is fully priced - or very close to it. Confirmation of a solid Tory majority may see a knee-jerk move higher in cable, but is vulnerable to "sell the fact" profit-taking and a shakeout of stale positions once the result of the election is known. As such, we would not chase cable higher in the immediate aftermath even if sterling may be a buy on dips further out.”
Market players may also emphasize on the November month Consumer Price Index (CPI) data from the United States (US) ahead of the last Federal Reserve (Fed) meeting of the year 2019. While the inflation numbers are likely to stay mostly sluggish, the Fed’s hints to 2020 and the Chairman Jerome Powell’s speech will be the key to watch.
Technical Analysis
Only if the pair stays below 1.3100, it can revisit November highs near 1.2985, except that pair’s recovery to March/April lows near 1.3272/80 can’t be ruled out.
Read: Chart of the week: GBP/USD bulls target closes above critical 1.3160/90 on UK election week
It's worth mentioning that traders may find a lack of momentum ahead of the key events/data.
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