GBP/USD trims a part of early strong gains, back below 1.2700 handle
| • The ongoing USD pullback/upbeat UK retail sales helped to build on the overnight rebound.
• The intraday positive move gathered traction after PM May finally announced to step down.
• Renewed concerns about a no-deal Brexit might keep a lid on any strong follow-through move.
The GBP/USD pair struggled to sustain its intraday strength above the 1.2700 handle and quickly retreated around 30-35 from daily tops.
The pair built on the overnight goodish bounce from the 1.2600 neighborhood, or fresh multi-month lows, and the initial uptick was supported by a subdued US Dollar price action, weighed down by Thursday economic data that showed that the US manufacturing activity slowed to its weakest pace in five year.
Dismal US macro data revived speculation that the Fed will have to cut interest rates to support the economy and continued weighing on the greenback on the last trading day of the week. Meanwhile, the British Pound got an additional boost following the release of mostly upbeat UK retail sales data for April.
Apart from the macro data, the Sterling was further influenced by the latest UK political development, wherein the PM Theresa May announced that she will be stepping down as Party leader on June 7th. It is worth reporting that May had been under immense pressure amid disagreements on her revised Withdrawal Agreement Bill.
However, the fact that a pro-Brexit hardliner Boris Johnson is the leading candidate and is gathering momentum to replace May, renewed concerns about a no-deal spilt might now turn out to be one of the key factors keeping a lid on any runaway rally. Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have actually bottomed out in the near-term.
Moving ahead, Friday’s US economic docket – highlighting the release of consumer durable goods orders, might influence the USD price dynamics and produce some short-term trading opportunities, though is likely to act as a major game changer for the major.
Technical levels to watch
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