GBP/USD reverses sharply to 1.2700 as Brexit uncertainty weighs

Having faced rejection once again near the midpoint of 1.27 handle, the GBP/USD pair changed course and quickly eroded nearly 50-pips on increased anxiety over the UK political scenario and Brexit while the holiday-thinned markets also helped to accentuate the down move. The UK markets are closed today in observance of Spring Bank holiday.

The corrective upside in the spot from four-month lows of 1.2605 continues to run into stiff resistance, as the odds of the UK leaving the European Union on October 31^st without a Brexit deal are seen rising, with the pro-Brexit hard-liner Boris Johnson is expected to replace Theresa May as the British Prime Minister. It’s worth noting that four of eight leadership candidates have said Britain must leave the EU on Oct, 31st even if no deal is in place.

More so, the latest comments from the UK opposition Labour Party Finance Policy Chief McDonnell hinting towards a general election and a second referendum added to the Brexit chaos and weighed negatively on the British currency.

Earlier today, the pair extended its recovery to 1.2755 levels following the UK EU election outcome that showed that the Brexit Party secured the highest number of votes. Haresh Menghani, FXStreet’s Analyst notes, “the initial leg of recovery was supported by mostly upbeat UK retail sales data for April and got an additional boost after the UK PM Theresa May finally announced that she will be stepping down as Conservative Party leader on June 7th. Apart from the latest UK political development, the positive momentum was further supported by a modest US Dollar pullback from levels beyond the 98.00 handle - roughly two-year high.” 

“Both the UK and the US markets will remain closed on Monday and hence, any incoming Brexit-related news/development might turn out to be an exclusive driver of the pair's momentum”, Haresh adds.

GBP/USD Technical Levels