GBP/USD – Pound Ticks Lower as Markets Eye British Election

The British pound has recorded small losses in the Tuesday session, as it hugs the 1.29 line. In the North American session, GBP/USD is trading at 1.2890. It is a quiet day on the release front, with no British events. In the US, the sole indicator, JOLTS Jobs Openings, jumped to 6.04 million, well above the estimate of 5.65 million.

With just two days to go before Britons go to the polls, the election campaign has tightened considerably and there is plenty of speculation as to what the political landscape will look like on Friday morning. The ruling Conservatives continue to hold onto a lead, but some polls have shown Labour creeping to within one point. Even if the Conservatives win the election, they could miss out on a majority. If that happens, Prime Minister Theresa May will find herself with a much weaker hand when entering into Brexit negotiations, as she will have to take into consideration the wishes of the opposition in order to govern with a minority in parliament. A more extreme scenario is that of Labor and the Liberal Democrats joining forces to form a coalition government, leaving the Conservatives in opposition. The markets are following the election campaign with bated breath, and the tremendous political uncertainty could lead to volatility from the pound as we approach Election Day.

The Federal Reserve is widely expected to press the rate trigger next week, which would mark the second quarter-point increase in 2017. Even a shockingly soft Nonfarm Payrolls report on Friday hasn’t put much of a dent in these expectations, with are rate hike currently priced in at 91 percent. Another rate hike by the Fed would mark a vote of confidence in the US economy, but Fed policymakers continue to have some concerns. Inflation remains stubbornly low, despite a labor market that remains close to capacity. Fed policy makers are also scratching their heads over soft consumer spending, which has not kept pace with high levels of consumer confidence. As for additional rate hikes in the second half of 2017, the markets remain skeptical, with the odds of a September rate hike at just 22%. However, stronger economic numbers in the third quarter could easily increase the likelihood a September hike.

GBP/USD Fundamentals

Tuesday (June 6)

  • 10:00 US JOLTS Job Openings. Estimate 5.65M. Actual 6.04M

*All release times are EDT

*Key events are in bold

 

GBP/USD for Tuesday, June 6, 2017

GBP/USD June 6 at 12:20 EDT

Open: 1.2904 High: 1.2950 Low: 1.2872 Close: 1.2893

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2571 1.2706 1.2865 1.2946 1.3058 1.3120
  • GBP/USD inched higher in the Asian session. The pair posted losses in the European session and is flat in North American trade
  • 1.2865 is providing support
  • 1.2946 is the next resistance line

Further levels in both directions:

  • Below: 1.2865, 1.2706, 1.2571 and 1.2401
  • Above: 1.2946, 1.3058 and 1.3120
  • Current range: 1.2865 to 1.2946

OANDA’s Open Positions Ratio

GBP/USD ratio is showing gains in long positions. Currently, short positions have a majority (59%). This is indicative of trader bias towards GBP/USD continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.