The Rise And Fall Of The Pound Amidst Political Turmoil
The biggest story on Monday was the rise and fall of the British pound which were due to political headlines. After Davis’ resignation, Boris Johnson and Steve Baker followed, who did not support Theresa May’s less aggressive so-called ‘soft Brexit’ approach. This throws the stability of the U.K. government into question. Any signs that Brexit negotiations could be delayed due to political uncertainties, could increase the pressure on the pound.
GBP/USD: The pound rose to a high of 1.3363 before the sharp decline happened that sent sterling back towards a test of 1.32. A significant break below 1.32 could spur bearish momentum towards 1.3150 and 1.31. For bullish momentum to resume we would need to see a sustained break above 1.3320.
The euro reversed shy off 1.18 but found some short-term support at 1.1730. ECB President Mario Draghi reiterated his warning that trade wars pose the greatest risk to growth and stability. From a technical perspective, we will keep tabs on a break below 1.17 as long as the euro proves unable to overcome the 1.18-hurdle.
Today, traders will watch first monthly estimate of the U.K. GDP at 8:30 UTC. From the eurozone we have the ZEW Surveys due at 9:00 UTC.
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