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GBP/USD Slides Following UK Political Uncertainty

Posted on the 07 October 2017 by Forex News Shop @forexnewsshop

The GBP/USD slid dramatically this week following continual uncertainty surrounding the likelihood of Theresa May continuing as the Conservative party leader and Prime Minister. The reports followed an extremely uncomfortable Conservative party conference.

During the conference a comedy unfortunate events unfolded including props falling from a back-drop screen, Theresa May suffering from a coughing fit and more worryingly a prankster handing May a mock-up P45! Sparking questions around the lax security.

The prankster’s statement highlighting supposed tensions between Theresa May and the Secretary of State of Foreign affairs Boris Johnson.

Johnson over the last few weeks appearing wittingly or otherwise to undermine the Prime Minister at every possible opportunity. These have included publishing his vision for Brexit within days of May’s scheduled speeches and insensitive jokes about Libya, serving to only discredit the party.

His actions apparently prompting many senior Conservative party members to request his dismissal and reshuffle her cabinet in order reaffirm her authority and banish any further talk of a leadership take over.

In recent hours Johnson, potentially now feeling like the vulnerable one has pledged his allegiance to the party and May. Rumours have also circulated in recent hours of a WhatsApp message whereby Johnson is called for the party to unite and get behind Theresa May.

How Doubts Over May’s Leadership Credentials Effected GBP/USD

The poorly delivered speech and continued uncertainty surrounding Theresa May’s post saw the Pound weaken significantly this week. The GBP/USD dropping from 1.3401 to a low of 1.3034 over the trading week and seeing the pair fall more this week than at any other point this year. GBP/USD did finish slightly higher than the low and closed trading at 1.3066. Down dramatically from the highs seen in mid-September.

GBP/USD Chart

The main driver as we have covered was continual questions surrounding the Conservative party leadership. However, the Dollar also enjoyed some much-needed strength with the average hourly earnings and US unemployment rate both posting positive numbers.

Average hourly earnings had been anticipated to grow by 0.3% but surpassed that reaching 0.5%. US unemployment figures also surpassing the expected level of 4.4%reaching 4.2% the lowest level of US unemployment in sixteen years.

Many investors now believing a US interest rate hike is all but a done deal with bookmakers now believing in a 90% chance of a December interest rate hike.

All Eyes Now Turn to the FOMC and US Inflation

Next week the FOMC release their latest minutes with investors keen to see how US inflations fairs this month. Last month’s inflation figures surpassing the expected 0.3% reaching 0.4% following months of disappointing inflation data.


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