GBP/USD consolidates the downside near 1.2600, UK politics in spotlight
|- Receding political uncertainty gains more attention than expected negatives from Brexit.
- Lack of data/events highlights UK leadership contest.
Although looming Brexit uncertainty dents investment by firms, the GBP/USD pair takes advantage of the recent US Dollar (USD) pullback to remain on the bids near 1.2600 while heading into the London open on Monday. Given the lack of data/events at home and abroad, political plays ahead of Tuesday’s another round of voting to select Tory leader will gain major market attention for fresh impulse.
While 3 out of 10 candidates for the UK Prime Minister’s race were already bowled out during last week, the Health Minister Matt Hancock also announced his departure from the contest and rather supported Boris John during the weekend.
Boris Johnson, the ex-Foreign Minister and previous Mayor of London, is now considered the strongest contestant after gaining more 114 votes during the latest round of poll and also getting supports of influential British lawmakers. He is considered a Brexit hardliner and gained additional strength from the last week's rejection of opposition Labour party’s motion to block no-deal Brexit by the British parliament.
Elsewhere, the British Chambers of Commerce (BCC) recently upgraded its 2019 growth forecast to 1.3% from 1.2% prior prediction but cut its 2020 expectation to 1.0% from 1.3%. It was also reported that the UK firms could cut investments by the most in 10 years considering Brexit uncertainty.
The second round of voting for the Tory leader, up for Tuesday, will be on the traders’ radar with remaining 6 candidates. However, the US NY Empire State manufacturing index and NAHB housing market index can offer intermediate moves. The June month manufacturing gauge may slip to 12.75 from 17.80 while the housing market index isn’t expected to deviate from 66.00 prior.
Technical Analysis
Pair’s sustained downturn beneath latest low surrounding 1.2560 highlights December 2018 bottom near 1.2480 and the year 2019 low close to 1.2430 whereas 1.2645/55 region, including May 31 high and June 10 low, can keep limiting near-term advances to 1.2710 and 1.2770 numbers to the north.
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