The UK elections resulted in May losing her parliamentary majority. She continues holding onto power thanks to a controversial coalition with the DUP, a small reactionary party. Her grip on power seems to have weakened, with criticism coming from everywhere. So far, she has sacrificed her closest aides: Nick Timothy and Fiona Hill.
Brexit negotiations are due to start in the week of June 19th. On that date, next Monday, May is expected to receive a vote of confidence for her new government and things are far from clear.
Despite all this, the pound continues licking its wounds and ticks higher. GBP/USD trades at 1.2747. On the day, it is only marginally above previous levels, but it is certainly off the lows seen in the wake of the European session on Friday, as the results became clear.
Rating agencies have warned about the risks from the UK election. Fitch, Moody’s and S&P worry about Brexit negotiations, another round of elections and May’s coalition with the DUP.
GBP/USD – the next moves
The current range is 1.27 to 1.2770, with well-respected resistance: the pair peaked at 1.2769. Further resistance is at 1.2825 followed by 1.29. Support is at 1.2615 and 1.25.
Can the pair fall? A lot depends on the political fallout. If May manages to stabilize things and prepare for Brexit negotiations, we could see a move to the upside. If the knives continue coming out and negotiations are postponed, it could spell trouble for the pound as well.
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