GBPUSD Brexit & Election Update
The general election remains the primary focus for UK financial markets with the campaign unfolding. GBPUSD shows signs of recovery, but for how long? Most of the political parties have launched their manifestos. The Conservatives promised a triple lock on personal tax calculations combined with increased expenditure in public service sectors. Last week saw the first televised debate between PM Johnson and Labour Party leader Corbyn. Flash polls suggest PM Johnson a marginal winner from those questioned concerning the candidate performances.
Other scheduled events include a live debate on the 29th of November. It will feature ‘senior’ party figures and a further head-to-head between Johnson and Corbyn on 6th December. A snap poll following the first debate showed the PM as only a marginal winner 51% to 49%. However, the Conservatives continue to command a substantial lead in polls regarding the likely result of the election. So far, the impact of the campaign on market pricing seems to have been limited. Sterling continues to hover close to the top end of its trading range for the second half of 2019. Overall has only moved marginally over the past few weeks. Volatility may rise as the election draws near.
Data Weighing on GBPUSD
Economic data releases have had little impact on the UK financial markets of late. That seems likely to continue to be the case with next week’s sparse calendar. Possibly of most interest will be the November readings for the GfK consumer confidence measure and the Lloyds Bank Business Barometer. Their data came out mixed last month as consumer confidence dropped to a joint low for the year. Whereas the business measure rose for the second consecutive month.
Brexit & Election Impact
Friday’s data will be of interest for the impact on the sentiment of the Brexit deal with the EU and the announcement of the general election. Already released November ‘flash’ PMI data were much weaker than expected, with services activity in particular down sharply. However, these seem to have underestimated output growth compared to ‘official’ data in recent months.
The CBI retail survey on the 25th of November provided one of the first updates on the health of retailing. It came in better than expected. However, it has not been a good indicator of the official retail sales measure of late. Additionally, it will not include the impact of Black Friday sales. Also, of interest will be the Bank of England’s lending and mortgage approvals data for October (Friday). That has recently been showing a relatively subdued level of activity in the housing market.
GBPUSD Technical Takeaway
Intraday price action has been suggesting a consolidation phase this week. The pullback has seen holding over support in the 1.2910-1.2880 region. While this area holds, there is still a chance for a test towards 1.3075-1.3125 range resistance. However, risks are rising for a breakdown through 1.2820 suggesting we are turning back into the broader consolidation 1.2700-1.3000 range, probably into the general election. Long term, bias is that 1.1490 was a major low. However, a break below 1.1950 would question that and probably see those supports re-tested. Otherwise, a move back above 1.32 supports a more structurally underlying bullish view.