GBP/USD remains on the back foot, all eyes on Conservative voting

  • The first round of voting for Tories to select their new leader takes place today.
  • All the 10 candidates need at least 16 votes (5%) to remain on the card.
  • The expected lead of Boris Johnson and demise of a motion to block no-deal Brexit highlights the risk.

While the failure of Labour-led motion to block the chances of no-deal Brexit weakened the Pound (GBP), the GBP/USD pair remains on a back foot around 1.2690 as traders await the first round of voting to decide the new Tory leader while heading into the London open on Thursday.

Even if the ex-London Mayor Boris Johnson is leading the run to become the next British Prime Minister mainly due to his Brexit hardliner image, he needs to get through today’s parliament voting with more than 16 votes in order to remain in the race.

Mr. Johnson recently announced his election propaganda to leave the block by October 31. However, the latest clues have mostly been silent about his stance on dealing with the EU during the time.

The opposition Labour party continues to signal another attempt to block the no-deal Brexit sometime in the near future but the markets give less importance to it.

At the US, the greenback holds its status as the market favorite amid less dovish Fed highlighting its safe-haven demand in times when the trade tussles are in the spotlight.

Given the absence of major data on the economic calendar from both the economies, investors may emphasize political plays to determine near-term trade direction.

In case of the USD, the US-China stalemate continues to flash mixed signals of a trade deal while the weekly initial jobless claims for the period ended on June 07 might soften a bit to 217K from 218K.

Elsewhere, chances are bright that some of the contestants of the UK PM’s race might be off from today and hence giving a clearer picture of the next British leader. Though, Boris Johnson is likely to remain on the top unless any surprises take place, which in turn highlights the chance of a hard Brexit and a weaker British currency given the latest failure of Labor-led motion.

Technical Analysis

The 1.2600 round-figure can offer an intermediate halt prior to shifting market attention to 1.2560 and December 2018 low near 1.2480.

Alternatively, 1.2760 and 1.2865/75 region including April low and 50-day simple moving average (SMA) could keep challenging the buyers.

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