British Pound: USD/GBP (GBP=X) General Election adds to uncertainty
Pound Sterling remains under pressure in mid-week trade with foreign exchange markets digesting the latest political headlines that suggest a General Election is being considered by Boris Johnson.
Johnson remains favourite to replace Prime Minister Theresa May new Tuesday when the result of the Conservative Party leadership vote will be made known, and senior allies of Johnson told the Times newspaper that he wants to hold an early general election “while Jeremy Corbyn is still around”, and that plans are being considered to overhaul the Conservative Party’s campaign machine.
The Times reports Sir Edward Lister, who would oversee Johnson’s first 100 days in office, is planning to ramp up recruitment and pump more money into Conservative headquarters to ensure that the party is on an “election footing”.
Sterling is a political currency at present, therefore the uncertainty that a General Election promises will likely only add to existing downside pressures.
“The market appears to be obsessed with the likelihood of renewed political chaos in the UK, with investors continuing to spurn the British Pound,” says Marc-André Fongern, Head of FX Research at MAF Global Forex.
The Pound-to-Euro exchange rate fell to a fresh seven-month low at 1.1047 over the past 24 hours amidst growing ‘no deal’ Brexit expectations, meanwhile the Pound-to-Dollar exchange rate has this morning triggered another two-year low having tested 1.2383.
“Dark times for the Pound with GBP/USD posting at 1.23 handle for the first time since April 2017. Bitter pill to swallow – but the next Prime Minister has to view this as a sign of lack of faith in UK politics and governance by international investors. And they must address this,” says Viraj Patel, a foreign exchange strategist with Arkera.
An early General Election is one of a duo of political risk factors weighing on Sterling, the other – and most significant – is of course a ‘no deal’ Brexit.
Johnson has steadfastly ruled out triggering an early General Election, but the maths in Parliament are firmly pitted against him with the Conservatives expected to hold a majority of just three once the by-election in Brecon and Radnorshire has concluded next month.
Talk of Conservative MPs voting against their own government should a no-confidence vote be called to prevent a ‘no deal’ Brexit mean the new Prime Minister might have little choice but to face the electorate.
Senior Conservative MP Dominic Grieve has said former cabinet ministers could be among those who feel they have no choice but to vote down a Boris Johnson administration in order to prevent a ‘no deal’ Brexit.
Grieve believes a ‘no deal’ Brexit is becoming increasingly likely as both Johnson and his leadership rival Jeremy Hunt both appeared to reject the Northern Ireland backstop as being something they would accept in any future deal with the EU.
Signals have meanwhile emerged that the EU would seek to sweeten the backstop in order to potentially help the deal they reached with Prime Minister Theresa May to cross the line in Parliament.
But, Johnson and Hunt have indicated the entire backstop mechanism must be jettisoned, thereby adopting a stance that suggests a compromise on the matter is highly unlikely.
“Blocking ‘no deal’ technically may be quite difficult but as I’ve said on many occasions in the last 12 months, if the government persists in trying to carry out a no-deal Brexit I think that administration is going to fall,” said Grieve.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 1.27.
The projected upper bound is: 1.25.
The projected lower bound is: 1.23.
The projected closing price is: 1.24.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 19.7256. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 35.82. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 6 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -114.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 11 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed up 0.000 at 1.243. Volume was 96% below average (consolidating) and Bollinger Bands were 22% wider than normal.
Open High Low Close Volume___
1.243 1.244 1.242 1.243 5,847
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.25 1.27 1.29
Volatility: 8 6 10
Volume: 105,339 126,710 166,003
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 3.4% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 7 periods.