GBP/USD consolidates weekly gains above 1.2900 as pound remains supported ahead of UK elections

• Cable rose on Friday for the second day in a row and hit weekly highs versus US dollar. 
• UK elections expectations continue to support the pound in the short-term as greenback loses strength amid lower yields. 

The GBP/USD pair continued to rise on Friday and reached at 1.2918, the highest level since November 4. Near the end of the week, it was hovering above 1.2900, consolidating weekly gains. 

All about the elections

“The slew of data in the UK this week failed to drive any move in sterling as markets continue to focus solely on the upcoming general election. In the past few days, the Brexit Party pledged not to contest Conservative Party seats while presenting a candidate in all Labour-held seats. When adding a rising lead of Boris Johnson’s Conservatives in latest opinion polls, investors have been able to cement their expectations around a (market-friendly) Tory majority win”, explained ING analysts. They see the pound supported in the near future with the downside limited. 

The greenback is about to end the session on a weak note on the back of a sharp downside correction in US yields. The 10-year was near 2% a few days ago and dropped toward 1.80%. US data and many speeches from Federal Reserve officials failed to offer support to the US dollar. The DXY turned to the downside from one-month highs falling back below 98.00. 

The economic calendar looks light for next week. “Data-wise, PMIs may point to further manufacturing weakness but should once again have a limited market impact; on the political side, the first television debate between Mr. Johnson and the Labour leader, Jeremy Corbyn, will be the highlight of the week”, explained ING analyst. US/China trade deal headlines will likely continue to be a key driver of market sentiment. 

Technical outlook

From a technical perspective, GBP/USD has lost upside momentum on the daily chart – a bearish sign, notes Yohay Elam, analyst at FXStreet. “It is also capped by downtrend resistance and experiences lower highs. On the other hand, sterling continues trading above the 50, 100, and 200-day Simple Moving Averages. Overall, bears are gaining ground but are far from taking over.”