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GBPUSD Outlook: Political Risk Hitting Sterling as PM Race Heats Up

GBPUSD Outlook: Political Risk Hitting Sterling as PM Race Heats Up

2019-06-13 08:00:00
Nick Cawley, Strategist
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Sterling (GBP) Price, Chart and Analysis

  • The first round of voting for the UK PM role takes place today.
  • US dollar rebound weighs on GBPUSD.

Q2 2019 GBP and USD Forecasts andTop Trading Opportunities

GBPUSD Dips and Looks Vulnerable

The contest to become the next UK Prime Minister continues in earnest today and it is likely that there will be three or four casualties before the day is out. In order to proceed to the next round of voting (June 18), the 10 leadership candidates will have to have the backing of at least 16 Conservative MPs. Candidates Mark Harper, Rory Stewart, Esther McVey and Andrea Leadsom are all currently polling single figures and look likely to miss the cut. The threshold for the June 18 vote will then be increased to 32 votes.

UK Leadership Contest Timeline: Who Will be the Next UK Prime Minister?

Wednesday’s GBPUSD rally has been turned around in early turnover today and the pair have dropped back below 1.2700 and look set to edge lower. While political risk is weighing on the pair, the pick-up in the US dollar has also sent cable lower. Wednesday’s US inflation numbers came in a touch lower than market expectations, adding to calls for a rate cut in the near-term. However, the US dollar picked up from its low, propped up once more by the supportive 200-day moving average.

US Dollar Basket Daily Price Chart (May 2018 – June 13, 2019)

GBPUSD Outlook: Political Risk Hitting Sterling as PM Race Heats Up

IG Client Sentiment data paints a negative picture for the pair with 78.2% of traders long GBPUSD, a bearish contrarian bias signal. However, recent daily and weekly positional changes give us a stronger bearish contrarian bias for GBPUSD

GBPUSD needs to hold the June 10 low at 1.2653 to stem further losses, with little support seen between there and the May 31 multi-month low at 1.2559. To the upside, 1.2764 needs to broken and closed above to allow further upside.

GBPUSD Daily Price Chart (October 2018 – June 13, 2019)

GBPUSD Outlook: Political Risk Hitting Sterling as PM Race Heats Up

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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

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