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GBP/USD regroups from fresh bear cycle lows driven by the woes of Downing Street

  • GBP/USD holds near the lows of the week due to political turmoil.
  • The BoE bets are being placed and weighed against Borish Johnson's survival rate and Brexit woes.

At 1.1928, GBP/USD is under water slightly, bleeding by 0.11% at the time of writing after sliding from a high of 1.1989 to a low of 1.1875 on the day so far and in the aftermath of yesterday's resignations of members of the Conservative party.

 Health Minister Javid and Finance Minister Sunak resigned almost simultaneously out of dissatisfaction with UK PM, Boris Johnson's leadership. ''Replacements were immediately appointed in the persons of Barclay and Zahawi, but given the ongoing unrest, the question is how long they can enjoy their new office,'' analysts at Rabobank said. ''It could mean that the government will come up with popular measures, such as another tax cut, in an effort to regain the confidence of voters and party members.''

Sterling bears were hesitant to mark down the currency initially as the US dollar was drifting away from the fresh bull cycle highs made in the prior hours and earlier in the day. However, the currency fell to a fresh cycle low in London and again at the start of the New York session. Cable is now down nearly 12% against the dollar since the start of this year.

 Nomura said on Wednesday it now expects sterling will slide in the coming months to its lowest level against the US dollar since 1985."We remain short GBP/USD in spot and now target 1.15 by end-July, towards 1.10 by end-September. With the U. becoming a key energy export partner for Europe this is leading to significant terms of trade shock to the benefit of USD."  The analysts at Nomura also argue that the Bank of England also looked likely to disappoint investors betting on a 50-basis-point interest rate hike in August.

Casting minds back over the monetary policy path to date at The Old Lady, since December, the BoE has lifted the Bank Rate five times already. The market is pricing in 130bps of hikes over the next three meetings (August, September, and November), implying at least two meetings with 50bps hikes.

In other politics, an escalating row over Northern Ireland's status following Brexit could upend British trade ties with the European Union is also a weight on the currency.  ''Uncertainties regarding red tape associated with Brexit and fear of a trade war with the EU over the Northern Ireland protocol are likely to be clouding the investment outlook,'' analysts at Rabobank said. 

GBP/USD

Overview
Today last price1.1923
Today Daily Change-0.0021
Today Daily Change %-0.18
Today daily open1.1944
 
Trends
Daily SMA201.2224
Daily SMA501.2374
Daily SMA1001.2773
Daily SMA2001.3138
 
Levels
Previous Daily High1.2126
Previous Daily Low1.1899
Previous Weekly High1.2332
Previous Weekly Low1.1976
Previous Monthly High1.2617
Previous Monthly Low1.1934
Daily Fibonacci 38.2%1.1985
Daily Fibonacci 61.8%1.2039
Daily Pivot Point S11.1853
Daily Pivot Point S21.1763
Daily Pivot Point S31.1627
Daily Pivot Point R11.208
Daily Pivot Point R21.2216
Daily Pivot Point R31.2307

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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