GBP/USD – British pound under pressure as May shelves withdrawal bill

The pound slide continues this week. Currently, GBP/USD is trading at 1.2645, down 0.13% on the day. On the release front, unemployment claims, today’s highlight is unemployment claims, which is expected to drop to 212 thousand. On Friday, the U.K. releases retail sales and CBI realized sales, while the U.S. posts durable goods orders.

This week’s election for the European parliament could have significance for the Brexit negotiations. Starting on Thursday, voters in the 28 EU countries (including the U.K.) will elect lawmakers to the European parliament. Key issues include the economic slowdown, Brexit and the rise in Euroskpeticism. Euro-skeptics increased their representation in parliament from 12% to 25% in the last election, and with the dramatic increase in strength of populist parties, this trend could well continue. The Brexit party, headed by Nigel Farage, is expected to do well, while the Conservatives could be trounced, adding to Prime Minister May’s woes. There have been rumors swirling about May being forced out of office shortly, and the government has delayed the withdrawal bill, which was scheduled to be voted on in parliament on June 4.

There were no surprises from the Federal Reserve minutes, which provided details of the policy meeting earlier in May. Fed members continued to preach patience, stating that rates will likely remain unchanged for some time. The minutes indicated that although members are more optimistic about economic growth, they remain committed to maintaining current rate levels, given that inflation remains low. It should be noted that the policy meeting took place on May 1-2, one week before President Trump announced new tariffs on China, which has significantly escalated trade tensions between the U.S. and China.

The Fed minutes may have reinforced the central bank’s stance that no rate moves are planned until next year, but the markets don’t share this view, with many analysts expecting at least one rate cut in 2019. Lower U.S. rates could dampen enthusiasm for the U.S. dollar. The CME Group has priced in a 36% likelihood of a 25-point basis cut at the September meeting.

British pound sinks as end nears for May; Nothing new from FOMC Minutes

Sell May and go away

Crude prices tumble furthers

GBP/USD Fundamentals

Thursday (May 23)

  • Day 1 – European Parliamentary Elections
  • 8:30 US Unemployment Claims. Estimate 215K
  • 9:45 US Flash Manufacturing PMI. Estimate 53.0
  • 9:45 US Flash Services PMI. Estimate 53.6
  • 10:00 US New Home Sales. Estimate 678K
  • 10:30 US Natural Gas Storage. Estimate 104B

Friday (May 24)

  • 4:30 British Retail Sales. Estimate -0.3%
  • 6:00 British CBI Realized Sales. Estimate 6
  • 8:30 US Core Durable Goods Orders. Estimate 0.1%
  • 8:30 US Durable Goods Orders. Estimate -2.0%
  • Day 2 – European Parliamentary Elections

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, May 23, 2019

GBP/USD May 23 at 8:25 DST

Open: 1.2717 High: 1.2666 Low: 1.2605 Close: 1.2645

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2401 1.2477 12615 1.2723 1.2841 1.2910

GBP/USD posted small losses in the Asian session. In European trade, the pair edged lower but then recovered

  • 1.2615 is providing support
  • 1.2723 is a weak resistance line
  • Current range: 1.2615 to 1.2723

Further levels in both directions:

  • Below: 1.2615, 1.2477 and 1.2401
  • Above: 1.2723, 1.2841, 1.2910 and 1.3000

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.