The British pound dropped below key support around the 1.2800 level against the US dollar on Friday after some negatively-perceived economic and political news emerged from the UK on Thursday. First, the UK’s Q1 GDP estimate released on Thursday morning was revised down to 0.2% against prior forecasts of 0.3%.
Even more damaging to the recently-strengthening pound, however, was the latest opinion polling for the upcoming June 8th UK elections that was released late on Thursday. The poll, conducted by YouGov/The Times, suggested that UK Prime Minister Theresa May’s Conservative Party is now leading by only 5 points ahead of its closest rival, the Labour Party, down from a 20-point lead less than two weeks ago. This sharp reduction in the Conservative lead weighed heavily on the pound, as it raised questions on whether May would be able to secure enough of a majority and mandate to fend off Brexit hardliners and deal with difficult Brexit negotiations in a smoother, less turbulent manner.
On the US side, the dollar found some footing on Thursday and Friday after having spent much of the past two weeks in a virtual state of free fall against a few other major currencies, most notably the euro and Swiss franc. This relative stabilization for the dollar was helped along on Friday by a better-than-expected US Q1 GDP reading, which showed an annualized 1.2% growth rate – higher than both the previous reading of 0.7% and the consensus forecast of 0.9%.
The pound’s sharp fall and dollar’s modest bounce on Friday resulted in a tentative GBP/USD breakdown below key 1.2800 support, as previously noted. This level also coincided with a clear uptrend support line extending back to the mid-March low. Additionally, directly below current price action is the support provided by the key 50-day moving average. With any further relief rally for the US dollar ahead of next week’s pivotal US jobs report and/or more pound jitters ahead of the early-June UK election, a follow-through breakdown below the noted support for GBP/USD could begin to target the next major support objective around the 1.2600 level.
Investopedia does not provide individual or customized legal, tax, or investment services. Since each individual’s situation is unique, a qualified professional should be consulted before making financial decisions. Investopedia makes no guarantees as to the accuracy, thoroughness or quality of the information, which is provided on an “AS-IS” and “AS AVAILABLE” basis at User’s sole risk. The information and investment strategies provided by Investopedia are neither comprehensive nor appropriate for every individual. Some of the information is relevant only in Canada or the U.S., and may not be relevant to or compliant with the laws, regulations or other legal requirements of other countries. It is your responsibility to determine whether, how and to what extent your intended use of the information and services will be technically and legally possible in the areas of the world where you intend to use them. You are advised to verify any information before using it for any personal, financial or business purpose. In addition, the opinions and views expressed in any article on Investopedia are solely those of the author(s) of the article and do not reflect the opinions of Investopedia or its management. The website content and services may be modified at any time by us, without advance notice or reason, and Investopedia shall have no obligation to notify you of any corrections or changes to any website content. All content provided by Investopedia, including articles, charts, data, artwork, logos, graphics, photographs, animation, videos, website design and architecture, audio clips and environments (collectively the "Content"), is the property of Investopedia and is protected by national and international copyright laws. Apart from the licensed rights, website users may not reproduce, publish, translate, merge, sell, distribute, modify or create a derivative work of, the Content, or incorporate the Content in any database or other website, in whole or in part. Copyright © 2010 Investopedia US, a division of ValueClick, Inc. All Rights Reserved
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.