GBP/USD: Sterling may remain depressed due to UK political uncertainty
- Doubts over Brexit likely to keep GBP/USD under pressure.
- EU is likely to grant a three-month extension, but the decision may not come on Friday.
- UK PM calls for a snap election, opposition rejects the election offer.
The path of least resistance for Sterling is to the downside, as the prospect of a UK election has added fresh uncertainty to the ongoing Brexit saga.
British Prime Minister Boris Johnson on Thursday conceded for the first time that he will not meet his "do or die" pledge to take Britain out of the European Union (EU) before Oct. 31 and called for a general election on Dec. 12 to break Britain's Brexit impasse.
The opposition, however, has rejected the election offer with Labour leader Jeremy Corbyn stating that he would wait to see what the EU decides on a Brexit delay before deciding which way to vote on Monday.
Meanwhile, the EU is reportedly considering granting a three-month extension. The decision, however, might not come on Friday, an EU official from the bloc said, according to Reuters.
All-in-all, Brexit is in limbo and Johnson seems stuck between a rock and a hard place. Traders, therefore, are unlikely to buy Sterling.
Technical charts are also calling a move lower. Notably, Thursday's bearish outside bar candle has opened the doors for a deeper pullback, possibly to the 200-day average at 1.2712.
As of writing, the pair is sidelined below the 200-hour average at 1.2852.
Technical levels
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
