GBP/USD Down To Nine Week Lows Amidst Brexit And Theresa May Uncertainties
The British Pound is trying to steady at nine-week lows after coming under strong bearish pressure in recent weeks. The pound slumped to its lowest level at $1.2929, in Tuesday trading session as lawmakers came back from a short holiday.
Brexit will remain the talking point, about GBP/USD direction of trade, amidst ongoing talks between Conservative and Labor Party.
GBP/USD has lost its long-standing uptrend support line on traders reacting to Brexit uncertainty. A string of negative news, as well as below par economic data, has continued to pile pressure on the Pound as well. With momentum, leaning to the downside, the Pound is likely to lose further ground against the dollar.
The broad-based greenback strength has continued to worsen GBP woes, as it remains the key driver of the GBP/USD pair price action. GBP/USD could lose some ground heading into the weekend as the greenback continues to preserve and strengthen its bullish momentum.
GBP/USD pair faces strong support at the 1.2975 level, which is a low point recorded in March. A breach of the support level could result in the pair edging lower probably back to the 1.2960 level with 1.2830 hanging on the horizon.
Given the strength of the dollar, the Pound’s upside is likely to experience strong resistance at the 1.3015 level. With no important economic data scheduled for release, the pound is likely to continue trading sideways after the recent plunge lower.
Solid economic data indicating that US home sales increased 4.5% in March to beat expectations of a 2.5% decline is the latest catalyst fuelling the Dollar’s strength as it affirms economic growth. Strong Q1 financial results have also eased concerns of an economic slowdown in the United States, another development behind the dollar’s strength.
Given the strong economic data, the US Federal Reserve may be forced to revert from its dovish stance that triggered greenback weakness a few months back. Such a move should lead to further strengthening of the dollar consequently pilling more pressure on the Cable.
Theresa May Under Pressure
Away from the greenback strength, Brexit talks, as well as uncertainty, should continue to affect the strength of the British Pound. Theresa May government is currently engaged in high-level negotiations with the opposition but with little to show off as it seeks to settle the Brexit standoff.
Amidst the Brexit talk, there is already chatter that lawmakers could move to oust the Premier over his handling of the Brexit matter. Should a vast majority of Torrey Lawmakers show support for the drive, the sterling pound could also come under pressure as such a move brings about another level of uncertainty.
Amidst the geopolitical and economic growth uncertainty, the US dollar tends to maintain a higher ground as a safe haven currency. Given that, many central banks are considering interest rate cuts and investors are increasingly switching their attention to the safety of the dollar.