• Investors seemed convinced that May’s Brexit deal will not pass through the UK parliament.
• Speculations over May’s replacement with a pro-Brexit PM add to concerns about a no-deal.
• The USD climbs to multi-week tops and further collaborates to the ongoing bearish trajectory.
The GBP/USD pair finally broke down of its consolidative trading range and slipped below the 1.2700 handle, or fresh three-month lows in the last hour.
The UK political headwinds continued denting sentiment surrounding the British Pound and ensured that bearish traders maintained their dominant position on Wednesday. The pair added to its recent heavy losses and has now retreated nearly 500-pips from the 1.3175-80 region touched earlier in May.
The latest leg of a downtick since the early European trading session lacked any obvious catalyst but came after the UK opposition Labour party MP Emily Thornberry reiterated that her party will vote against the UK PM Theresa May Withdrawal Agreement Bill in June.
The comments reinforced market expectations that May's Brexit deal stands no chance to get parliament's approval for the fourth time and increase chances of her early exit. This coupled with speculations over her replacement with a pro-Brexit PM eventually raises the risk of a no-deal Brexit and might continue fueling the GBP weakness.
On the other hand, the US Dollar climbed to fresh three-week tops and further collaborated to the pair's heavily offered tone. The greenback remained supported by the fact that the Fed Chair Jerome Powell indirectly argued against cutting interest rates by saying that it was premature to make a judgment about the impact trade-tariff issues could have on monetary policy.
With the second-tier release of existing home sales data from the US, Tuesday’s economic docket lacks any major market-moving economic releases and hence, the incoming Brexit-related news/developments might continue to act as an exclusive driver of the pair’s momentum.
Technical levels to watch
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