GBP/USD Extending Losses On UK Political Uncertainty
Pound/dollar already erased the election announcement gains, falling to the lowest levels in two months. We listed 3 reasons for the downfall. Different forces converged to hurt the currency pair.
And now, cable extends its downfall, and it is led by UK politics. Her Majesty The Queen will make her speech today, laying out the new government’s plan. However, the plan will be limited, as the government still does not have a majority.
Talks between PM Theresa May’s Conservative Party and the Northern Irish DUP have not been concluded. According to some UK news outlets, the small party wants more respect from the ruling Tories. Comments by backbenchers have resulted in insults. The DUP is also taking advantage of its position as a kingmaker party.
The two parties will likely forge a deal, but many analysts see a limited reign for May. Another round of elections is likely later this year.
GBP/USD slips
Pound/USD reached a new low of 1.2589, the lowest since the day May announced the elections on April 18th. Psychological support is at 1.25.
Further support is at 1.2350, followed by 1.2250. Resistance is at 1.2635, the low point before the most recent drop.
Here is how it looks on the daily chart:
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