GBP/USD Forecast: Bearish outlook as bearded Corbyn rises in the polls

"Jeremy Corbyn, PM" – that is a headline that many investors fear. While it has low chances, the probability of having the hard-left leader of the Labour Party in Downing Street has risen. The pound has responded with a drop. Bearded Corbyn is bringing the bears out.

Markets prefer Prime Minister Boris Johnson's Conservatives to win an absolute majority in the December 12 elections, which would then ratify the Brexit accord and enact market-friendly policies. Corbyn's massive £83 billion spending plans are keeping some investors awake at night. 

Here are three recent polls that reflect a squeeze in the Tories' margin:

• A fresh poll from Kantar has shown a broad 11% gap in favor of the Conservatives, but seven points fewer than the firms's previous survey.
• Survation's latest poll reflects an 11-point lead as well, and here it is down by three points.
• ICM Research has shown a narrower seven-point gap, down from ten points.

Political analysts and traders are awaiting the "mother of all polls" – Yougov's Multilevel Regression and Post-stratification (MRP) survey. Back in 2017, this broad statistical exercise correctly foresaw the result – a hung parliament. While it failed to project the exact number of seats for each party, it was sufficiently accurate to raise expectations now.

YouGov's publication on Wednesday at 22:00 GMT may move the pound. 

Beyond the elections

The US and China have reached a "consensus" for Phase One of the trade deal – but still, have differences in the rollback of tariffs. Markets have gotten used to optimistic comments and seem to shrug off the upbeat news. Investors may wait until the world's largest economies announce a defusion of the trade war before further buying. 

The safe-haven dollar remains bid amid concerns that an agreement will fail to materialize. 

Several US housing figures are on the agenda today, but the Conference Board's Consumer Confidence stands out. It may show an improvement in November, the month of Black Friday.

See Consumer Confidence Preview: Rising confidence supports the economy

Overall, election speculation is set to dominate trading today, with a minor influence from American developments. 

GBP/USD Technical Analysis

GBP/USD has dropped below the 50 and 100 Simple Moving Averages on the four-hour chart but clings onto the 200 SMA. Momentum is to the downside. 

Bears have the upper hand.

Cable may find support at the double-bottom of 1.2820, which supported the sterling in the past two weeks. Next, we find 1.2760, November's low. The next lines to watch are 1.2705 and 1.2655. 

Resistance awaits at 1.2890, which was a low point last week, followed by the weekly high of 1.2915. Next, we find two peaks which are close by – 1.2970 and 1.2985.