GBP/USD recovers a major part of the early slide, back near mid-1.3100s

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  • GBP/USD fell on Wednesday in reaction to the latest UK election poll results.
  • A modest pickup in the USD demand further contributed to the intraday slide.
  • The downside remains cushioned ahead of FOMC and UK election on Thursday.

The GBP/USD pair held on to its mildly weaker tone through the early European session on Wednesday, albeit has managed to recover a major part of its early slide to weekly lows.

The pair extended the previous session’s late pullback from over eight-month tops and witnessed some follow-through long-unwinding trade on Wednesday in reaction to the latest UK election poll, which tilted towards a hung parliament.

Focus remains on UK politics

A closely watched YouGov’s poll based on the MRP model showed a narrowing lead for Prime Minister Boris Johnson’s Conservative Party, now expected to win a majority of 28 seats in the parliament, down sharply from 68 last month.

This coupled with a modest pickup in the US dollar demand, despite persistent uncertainty over a potential phase one trade deal between the US and China, further collaborated to the pair’s intraday slide to the 1.3100 neighbourhood.

However, the fact that the outcome of the UK election remains uncertain, investors seemed reluctant to place any aggressive bets, which eventually helped limit further downside ahead of the highly-anticipated FOMC policy decision.

Heading into Wednesday’s key event risk, the latest US consumer inflation figures might influence the USD price dynamics and produce some short-term trading opportunities later during the early North-American session.

Technical levels to watch

 

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