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GBP Price Could Correct Higher as UK Political Risk Recedes

GBP Price Could Correct Higher as UK Political Risk Recedes

Martin Essex, MSTA,
What's on this page

GBP price, news and analysis:

  • UK Prime Minister Theresa May gives the closing speech at the annual conference of her ruling Conservative Party today.
  • If it goes without mishap, a reduction in political risk could prompt an upward correction in GBP.

Check out the IG Client Sentiment data to help you trade profitably.

UK political risk set to recede

GBPUSD remains in a downtrend but as UK Prime Minister Theresa May winds up the annual conference of her ruling Conservative Party today there is a chance of a correction upwards as traders decide that the moment of peak political risk has passed.

As the chart below shows, the downtrend in GBPUSD is continuing. However, the pair is modestly higher this session and appears to be supported close to the 1.30 level for now. That suggests a possible rally to the 1.3071 – 1.3117 area, where the 100-day moving average, the 20-day moving average and trendline resistance all sit.

GBPUSD Price Chart, Daily Timeframe (June 26 – October 3, 2018)

Latest GBPUSD price chart.

Chart by IG

May is expected to tell the conference in her keynote speech that Brexit is an opportunity that opens up a “future full of promise” for the UK and to attack her critics, like former Foreign Secretary Boris Johnson, who are jostling to replace her as party leader.

UK economy buoyant

The address will follow data showing only a modest fall in the purchasing managers’ index for the dominant UK services sector, down to 53.9 in September from the previous month’s 54.3 – trivially below the 54.0 expected but well above the 50 level that separates expansion from contraction.

IHS Markit, which compiles the data, noted that the solid rate of service-sector growth was maintained in September, that the growth of business activity has eased only slightly since August and that job creation edged up to a seven-month high.

Moreover, the British Retail Consortium’s shop price index showed an increase in September for the second consecutive month, emphasizing that Brexit has yet to have the negative impact on the UK economy predicted by some of those against the UK leaving the EU.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

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