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British Pound (GBP) Outlook Positive as GBP/USD Shrugs Off UK Political Turmoil

British Pound (GBP) Outlook Positive as GBP/USD Shrugs Off UK Political Turmoil

Martin Essex, MSTA, Analyst

GBP price, news and analysis:

  • As UK Prime Minister Boris Johnson’s “competence and integrity” have come under increasing scrutiny over the past few days, GBP/USD has held its ground.
  • That suggests underlying strength for GBP, particularly as the approach of local, regional and mayoral elections in the UK on May 6 might have been expected to add further political risk for British Pound bulls to contend with.
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GBP/USD Outlook: Underlying strength

Perhaps surprisingly, swirling allegations of wrong-doing centering on UK Prime Minister Boris Johnson in recent days have failed to damage GBP/USD, which has continued to trade within a broad band between 1.3670 and just over 1.40 for the past two months and a narrower band between 1.3810 and 1.4022 over the last few sessions.

That suggests traders remain positive towards the currency, particularly as UK local, regional and mayoral elections coming up on May 6 might have been expected to add a further dash of political uncertainty into the mix.

GBP/USD Price Chart, Daily Timeframe (January 8 – April 28, 2021)

Latest GBPUSD price chart.

Source: IG (You can click on it for a larger image)

Among the allegations made, which have – in the words of Johnson’s former chief adviser Dominic Cummings – questioned the Prime Minister’s “competence and integrity”:

  • Johnson is accused of saying that he would rather “let the bodies pile high” than order another lockdown
  • He is facing questions about who paid for a refurbishment of his Downing Street flat
  • The PM is accused of blocking an investigation into “chatty rat” leaks from Downing Street as a close friend of his fiancée Carrie Symonds would be implicated
  • He is alleged to have said he would fix tax issues asked for by businessman James Dyson, and
  • He reportedly said he would back controversial plans for a European Super League for top football clubs before changing course and opposing them when they proved unpopular

Much of this has been denied but Johnson’s mounting problems might still have been expected to damage the Pound, particularly as local, regional and mayoral elections in the UK on May 6 have added risk to the currency – with a majority for the independence-supporting Scottish National Party in Scotland a distinct possibility. The fact that it hasn’t argues that the Sterling bulls remain in charge and that further gains for GBP/USD could come once the claims and counter claims have been moved to the back burner.

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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

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