Perfect Storm for GBPUSD Shorts
UK Political Turmoil
The British Pound is coming under heavy selling pressure this week as political turmoil at home and a stronger US Dollar combine to weigh on sentiment. UK PM Keir Starmer is facing a leadership crisis this week with key resignations from cabinet as well as internal shifts and the rising threat of a leadership challenge. Manchester Mayor Andy Burnham is touted to stand against Starmer for the Labour leadership and there are fears that he would be a more left-leaning PM, advocating looser fiscal policy. GBP has fallen more than 2% form the week’s highs and looks set to continue lower while this uncertainty remains. If Burnham does make a leadership bid and Starmer exits his role as leader this should cause further losses in GBP as traders await insights into Burnham’s policy agenda.
Stronger US Dollar
Alongside UK political turmoil, the pair is also being weighed on by a stronger US Dollar this week. The greenback is rising sharply on the back of hotter-than-forecast US inflation data earlier in the week. Now back at 3 years highs, US inflation is fuelling an uptick in hawkish Fed expectations. A lack of progress in US/Iran peace talks is also fuelling strength in USD with traders sensing that the standoff between the two countries will continue longer than expected, keeping energy prices (and inflationary pressures) elevated accordingly. As such, GBPUSD looks vulnerable to heavier losses near-term.
Technical Views
GBPUSD
The failure in GBPUSD at the latest test of the 1.36 level has seen price reversing sharpy lower, now back below the 1.3446 level. With momentum studies bearish, all eyes are on the test of the bull trend line and 1.3285 level. Bulls need to defend this level to prevent a deeper drop towards 1.3046 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.