GBP/USD Forecast: Is May just posturing ahead of the Conservative Conference? If so, there's a buying opportunity

A defiant MAy more sent the GBP/USD plunging 1.50%.
The PM's position may be a political move ahead of her party's conference.
The downfall could turn into a buying opportunity.

Yohay Elam FXStreet

UK PM Theresa May said she always treated the EU with respect and expected the same. She said she will not accept tearing up her country in reference to the thorny issue of the Irish border and said the UK will not be a ruled take. The PM responded to the Salzburg Summit in which the EU rejected her Chequers proposal outright.

The feeling of rejection was exacerbated by the British newspapers, which described it as a humiliation. The EU's Donald Tusk did not help matters by posting jokes about eating a cake and leaving it whole, and also cherry picking, on his Instagram page.

With all this bad blood, it's no wonder the GBP/USD is down 1.50% and trades well below 1.3100. The pair touched 1.3300 on Thursday.

But are markets ignoring the context?

Mind the calendar

The PM faces fierce opposition from hard-Brexiteers in her party. And her party does not command a majority in parliament. Some of her opponents are already plotting to oust her and put former Foreign Secretary Boris Johnson in her place.

The Conservative Party holds its annual conference in Birmingham from September 30th to October 3rd. May may face a challenge there.

And by toughening up to the EU, she may convince some of her opponents that she is aligned with them, softening their desire to dethrone her.

As we have noted before, the UK may surrender and go for a Norway-style deal after the dust settles from the Tory Conference. If May is only posturing and markets took her for her word, things could turn around quickly.

GBP/USD volatility is elevated and so is sensitivity to any Brexit headline. A mere hint of a softer stance from October 3rd onwards could totally turn the tables in favor of Sterling.

Is there a buying opportunity here?

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.