We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Bullish
Bitcoin
Bearish
More View more
Real Time News
  • Have you joined @DailyFX @facebook group yet? Discuss your #forex strategies and brush up on your skills with us here: https://t.co/jtY1G7g8yx https://t.co/zSu6vNcTG5
  • #CLP, #BRL and the #ZAR are expected to be the most active Emerging Markets currencies vs #USD with 1-week implied volatilities at 15.43, 12.32 and 11.38 respectively
  • RT @RANsquawk: Asia fails to sustain the momentum from last Friday's record highs on Wall St, with the major indices in the region subdued…
  • (Asia Pacific AM Briefing) Will USD/JPY, AUD/USD and NZD/USD Prices Extend Recent Gains? $USDJPY $AUDUSD $NZDUSD - https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2019/11/18/Will-USDJPY-AUDUSD-and-NZDUSD-Prices-Extend-Recent-Gains.html?CHID=9&QPID=917702 https://t.co/NGza2qGF5r
  • 🇬🇧 GBP Rightmove House Prices (YoY) (NOV), Actual: 0.3% Expected: N/A Previous: -0.2% https://www.dailyfx.com/economic-calendar#2019-11-18
  • UK’s Rightmove House Prices (YoY) (NOV) Actual: 0.3% Est: N/A Previous: -0.2% #GBP
  • Heads Up:🇬🇧 GBP Rightmove House Prices (YoY) (NOV) due at 00:01 GMT (15min), Actual: N/A Expected: N/A Previous: -0.2% https://www.dailyfx.com/economic-calendar#2019-11-18
  • 🇯🇵 JPY Housing Loans (YoY) (3Q), Actual: 2.9% Expected: N/A Previous: 2.2% https://www.dailyfx.com/economic-calendar#2019-11-17
  • RT @MarketWatch: Hong Kong police storm campus to flush out protesters amid first appearance of Chinese troops https://t.co/cxiw7k9hWR
  • Japan’s Housing Loans (YoY) (3Q) Actual: 2.9% Est: N/A Previous: 2.2% #JPY
British Pound to Remain Lower after UK Election Surprise

British Pound to Remain Lower after UK Election Surprise

2017-06-12 03:50:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:
British Pound to Remain Lower after UK Election Surprise

Fundamental Forecast for GBP/USD: Bearish

- UK election outcome greatly complicates the Brexit negotiations, which are inevitably poised to be looked at in the “hard landing” outcome once again.

- Political risk premium in the UK should remain elevated for the foreseeable future as another general election can’t be ruled out.

- The retail crowd is hanging onto its net-short GBP/USD position, even after the downswing around the election.

The British Pound was the clear loser last week, dropping across the board and more than -2% in some cases, as the results of the UK general election shocked financial market participants. Despite having a clear majority in parliament, UK Prime Minister Theresa May’s decision to hold a snap election will be panned and criticized now that the Tories have fallen below the 326 seat threshold in order to have an outright majority.

With now having 318 seats in parliament, the Tories’ hold on power is starting to slip. This is bad news for the British Pound. Pre-election, the hope was that a wider majority in parliament would allow Theresa May to push for a “soft Brexit” as she would be able to ‘afford’ losing the support of right-wing Brexiteers and still get legislation pass through the House of Commons. The reality of the situation is quite different. Now that a hung parliament will exist with the Tories holding onto a slim majority overall, and only a governing capability under an alliance with Northern Ireland’s DUP, political stability is very much in question. Don’t be surprised if after a few months of strenuous leadership, the Tory-DUP alliance breaks down and voters head to the polls for another general election.

Now that a “hard Brexit” outcome will likely be speculated over, the Sterling’s uptrend originating in mid-April is very much in question. If history is any guide, then the hung parliament outcome of the May 2010 general election may serve as a guidepost for what to expect: British Pound weakness immediately; and over the next month. GBP/USD could trade lower towards 1.2500 again while EUR/GBP could rally above 0.9000.

The week ahead offers plenty of market moving data and events that an already-volatile British Pound will run into. The May UK Consumer Price Index release on Tuesday should help set the table for Thursday’s Bank of England policy meeting. Similarly, wage growth and labor data due out on Wednesday will serve as an appetizer for the Thursday rate decision. A weak series of data this week would come at a time when the British Pound is already pre-disposed for more downside.

See how our Q2’17 British Pound forecast is holding up so far - check out the DailyFX Trading Guides.

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

To receive this analyst’s reports, sign up for his distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.