Political Headlines Increase Pressure on UK and GBP
- Industrial Production declined by 0.3% MoM and by 1.4% YoY in UK
- The US will probably refrain from slapping tariffs on European cars
- Early election a huge moment for UK economy
The GBP/USD pair has advanced recently to 1.2897, but the pair is currently pressured by softer-than-anticipated UK data. The UK published this week that the UK Total Trade Balance posted a £12.541B deficit, while Industrial Production declined by 0.3% MoM and by 1.4% YoY.
It is also important to note that manufacturing production declined in the same period, but the UK avoided recession, growing by 0.3%. This is slightly below the 0.4% expected.
Despite this, the direction for GBP/USD remains bullish in the short term, supported by the fact that the United Kingdom and the European Union reached an agreement on the UK’s departure from the Union.
Early election to be a defining factor
The GBP/USD is trading this Tuesday around 1.2844, with the US dollar losing some of its gains in a risk-averse environment. Uncertainty is surrounding trade negotiations between the US and China. According to the latest news, the meeting between Trump and Xi Jinping could be delayed until December. Investors and traders are still waiting for information about tariffs removal before they make any decision.
The latest economic news from the UK was quite discouraging. The UK’s Total Trade Balance posted a deficit and industrial production declined. Despite this, the direction for GBP/USD remains bullish, but early election should be the prime GBP driver in the coming weeks.
The pound is also supported by comments from Brexit Party leader Nigel Farage, who said he won’t contest Conservative seats won at the last election. He will instead go after the seats held by Lib Dem and Labour. One should also mention that Scotland First Minister Nicola Sturgeon said she will not support Boris Johnson.
On the other side, the US dollar is highly sensitive to US-China trade relations and on tenterhooks with regard to the US economy in general. While still doing well in terms of economic growth, the US will probably refrain from slapping tariffs on European cars, according to the latest news this Tuesday.
Background noise and conclusion
Keep in mind that this currency pair is highly sensitive to the US-China trade relations and Brexit.
The major direction for this pair remains “bullish-neutral”, but as long the price is below 1.3000, we cannot have a clear picture. This is in spite of the large degree of uncertainty which surrounds the current market.