GBP/USD renews two-year low under 1.1500, UK leadership contest results eyed

GBP/USD slides to the fresh low since March 2020 as the cable traders await the UK PM Leadership results on Monday. That said, the cable trades take offers near 1.1470 heading into the London open.

It’s worth noting that the pre-result anxiety joins the fears of a worsening energy crisis in the UK and more noise surrounding the US-China tussle to exert downside pressure on the pair. However, the Labor Day holiday in the US appears to challenge the momentum traders.

That said, the energy woes escalated after the Group of Seven (G7) nations agreed on capping the price of Russian oil in the international markets. Following that, Moscow halted energy supplies to the European Union (EU) through Nord Stream 1 pipeline, citing a ‘leak’, during the weekend.

Alternatively, Politico ran a story mentioning that Russia’s Gazprom said on Saturday it would increase its shipments of gas to Europe via Ukraine, citing media reports.

Even so, a likely halt in the US-Iran nuclear talks also amplifies oil woes for the old continent, as well as for the globe. “Iran nuclear talks stall again after latest response from Tehran,” said Bloomberg.

Elsewhere, US President Joe Biden’s administration poured cold water on the face of expectations that the US may ease/remove the Trump-era tariffs on China. “The Biden administration will allow Trump-era tariffs on hundreds of billions of dollars of Chinese merchandise imports to continue while it reviews the need for the duties,” said Bloomberg.

At home, Liz Truss’ pre-result promise of dragging the UK out of the energy bill crisis appears to put her ahead of Rishi Sunak, which in turn could help the GBP/USD prices if she becomes the next British Prime Minister. However, her plans to review the Bank of England (BOE) and more stimulus fail to impress economists like Sunak and hence can keep the pair depressed after an initial rebound. The Tory Leadership Contest outcome will be around 23:00 GMT on Monday and will be important for the pair traders to watch for short-term directions.

It should be observed that the recent retreat in the hawkish Fed bets appears to stop the US dollar bulls amid a sluggish session, despite refreshing the multi-year high. That said, the US employment data marked mixed readings as the headline Nonfarm Payrolls (NFP) rose past 300K forecast to 315K, versus 526K prior, but the Unemployment Rate rose to 3.7% compared to 3.5% expected and prior. Further details reveal that the Average Hourly Earnings reprinted 5.2% growth for August, a bit lesser than the 5.3% market consensus. Also, Factory Orders dropped to -1.0% for July compared to 0.2% forecasts and 1.8% in previous readings.

Technical analysis

March 2020 low surrounding 1.1410 appears the last defense for the GBP/USD bulls, a break of which could make the pair vulnerable to declining towards the lows marked during 1985.