GBP/USD – British pound dips as Brexit Party shines in UK European elections

The pound has started the week with losses, erasing the gains seen on Friday. Currently, GBP/USD is trading at 1.2671, down 0.33% on the day. On the release front, markets are closed in both the U.S and U.K. for public holidays. On Tuesday, the U.S. releases CB Consumer Confidence. Investors are looking ahead to later in the week, as the U.S. releases first-quarter GDP on Thursday.

Elections to the European Parliament showed a dramatic surge in support for far-right parties across Europe, and the U.K. Brexit party was one of the day’s big winners. The party won 29 seats, compared to 10 for Labour and just 4 for the Conservatives. A chastised Prime Minister May tweeted that it “was a very disappointing night for the Conservatives”.  The election results were a resounding backlash against the mainstream parties for their handling of Brexit, which has dragged on past the original deadline, with no solution in sight. For investors, the worst-case scenario is a no-deal exit, which could undermine the economy and send the British pound sharply lower. Unless May can pull a Brexit rabbit out of her hat, it will be up to her replacement, as yet unknown, to try and hammer out a withdrawal deal with Brussels.

U.S. indicators ended the week on a disappointing note, as April durable goods orders were softer than expected. Durable goods orders slumped 2.1%, just below the estimate of -2.0%. This marked the sharpest decline since January 2018. The core reading slowed to 0.0%, down from 0.4% a month earlier. The U.S. economy has been performing well, and the economy will receive a report card on Thursday, with the release of Preliminary GDP for the first quarter, which is expected to post a strong gain of 3.1%. The initial GDP reading showed a gain of 3.2%, crushing the estimate of 2.2%. Will the revised release also beat expectations? If so, traders can expect the U.S. dollar to post broad gains.

Markets in holiday mood

MEU elections not so bad for EUR or GBP

European elections 2019: Power blocs lose grip on parliament

GBP/USD Fundamentals

Monday (May 27)

• There are no events on the schedule

Tuesday (May 28)

• 10:00 US CB Consumer Confidence. Estimate 130.1

*All release times are DST

*Key events are in bold

GBP/USD for Monday, May 27, 2019

GBP/USD May 27 at 10:40 DST

Open: 1.2713 High: 1.2748 Low: 1.2668 Close: 1.2669

GBP/USD Technical

GBP/USD posted slight gains in the Asian session. The pair reversed directions in European trade and recorded considerable losses. The downward movement continues in the North American session.

• 1.2615 is providing support
• 1.2723 is the next 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

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