GBP/USD: BoE shift and political uncertainty ahead of election to weigh on the pound – MUFG

Analysts at MUFG Bank, see the likelihood of the pound suffering a setback in the run up to the election has now been reduced although certainly not eliminated. They consider It will still be difficult for the GBP/USD pair to break above 1.3000 until there is more clarity. 

Key Quotes:

“Our short GBP position is to take advantage of a potential pick up in political uncertainty in the run up to the election. The Tories already have a large lead over the Labour party in the opinion and it is unlikely to widen much further. Market participants will be reluctant to lift cable above the 1.3000-level until there is more clarity after the election. It leaves the balance of risks more skewed to the downside for the GBP in the run up to the election given there is higher likelihood that the polls could begin to narrow and creating more political uncertainty.”

“The incoming economic data flow from the UK has taken a negative turn recently which if it continues will further encourage building BoE rate cut expectations. The GBP could also be challenged by more risk-averse trading conditions which started to creep in last week.”

“Public opinion polls would need to shift decisively to trigger a more volatile GBP. It has not happened yet broadly, although we note Britain Elects Poll Tracker shows the gap closing. Downside risks for GBP would increase if the gap starts to narrow across a wider number of polls, which would increase political uncertainty. It would open up GBP more to weakness coming through from the UK economy. Key support for cable is located at 1.2800, and then at 1.2700, the 200-day moving average.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD looks heavy after Friday's bearish outside day

EUR/USD risks reporting losses on Monday, having charted a bearish outside day candlestick pattern on Friday. The dollar will likely remain bid with markets no longer expecting the Fed to cut rates before the November 2020 Presidential Elections.


GBP/USD recovers Friday’s losses to 1.3150 as Tories top UK election polls

GBP/USD keeps the recovery mode intact near 1.3150 while heading into the London open on Monday. The spot seems to cheer the Tory lead in all the polls for this week’s UK election. 


Forex Today: US dollar buoyed by NFP, trade jitters ahead of a Big week

Forex today experienced a sense of caution in Asia this Monday, as Sunday’s dismal Chinese trade data combined with looming US Dec. 15 tariffs overshadowed the latest trade optimism. 

Read more

Gold: Sidelined after biggest daily decline in four weeks

Gold is lacking a clear directional bias in Asia, having registered its biggest single-day decline in four weeks on Friday. China's data may embolden President Trump to take more aggressive measures. 

Gold News

USD/JPY treads water around 108.60 ahead of a Big week

USD/JPY keeps its range around 108.60, as the yen bulls look to take advantage of upbeat Japanese Q3 data. Further, negative Treasury yields and S&P 500 futures weigh down on the spot. All eyes on FOMC and Trump's Dec. 15 tariffs.