- GBP/USD remains under pressure amid doubts over Tory manifesto.
- Broad USD strength, backed by recently upbeat data, adds to the pair’s weakness.
- Second-tier data from the US and the UK could entertain traders with trade/Brexit be the key drivers.
GBP/USD stays on the back foot around 1.2850 during Monday’s Asian session. The pair initial benefited from the polls showing a hike in Tory support for the December election before losing grounds on doubts emanating from the ruling party’s latest manifesto.
During the weekend, the United Kingdom’s (UK) Prime Minister (PM) Boris Johnson released the ruling Conservative Party’s manifesto that offers many austerity measures in addition to a smooth Brexit. The party’s promises over an increase in National Healthcare System (NHS) budget by £33.9 billion by 2023-24, an offer of 50,000 nurses and not to raise rates of income tax, national insurance or VAT over the next five years grabbed major attention. The same got criticized as well. Not only the opposition Labour Party Leader Jeremy Corbyn but the analysis provided by the independent charity organization Full Fact, published by The Guardian, also raises doubts over the government’s claims that their policy will cost the NHS £879m in 2023/24. Additionally, concerns about the increase in insurance contribution by the workers were also making rounds.
Even so, the latest series of polls keep the Conservatives at the front seat with more than 10 percentage points of a lead over other parties.
The Cable registered a heavy drop on Friday as preliminary reading of activity numbers keep portraying the market’s Brexit fears. The same contradicts with the United States (US) statistics that kept the greenback on the other side.
Also adding to the US dollar’s (USD) gains was optimism surrounding the US-China trade deal after the US President Donald Trump said that a trade deal with China is “potentially very close”. Though, optimism remains under check with the Trump administration’s readiness to take a “good look” at the Hong Kong bill, which in turn could renew the tussle between the US and China while also negatively affecting the trade negotiations. The latest news from Hong Kong shows pro-democracy parties leading in the local elections.
Moving on, the UK CBI Distributive Trade Survey and the US Chicago Fed National Activity Index, coupled with the US Dallas Fed Manufacturing Index, will decorate the economic calendar. Though, major market attention will be on the trade/political headlines for fresh impulse.
Technical Analysis
The pair’s declines below 21-day Simple Moving Average (SMA) highlights the monthly low near 1.2770 for sellers while an upside clearance of 1.2880 could target 1.2970 and 1.3000 during further recovery.
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