GBP/USD: the pound is included in the election race


GBP/USD continues to trade between the local support levels of 1.2800 and resistance of 1.3000.

The data on business activity in the UK manufacturing sector released last Friday pleasantly surprised investors. The indicator rose to a six-month high - 49.6 in October against 48.3 recorded in September.

Another important indicator of the state of the British economy was released at the beginning of this week - the PMI for the UK services sector, which rose to 50.0 in October from 49.5 in September.

Despite the growth of indicators, economists believe that the continuing uncertainty around Brexit will restrain activity in British business.


A regular meeting of the Bank of England took place today, as a result of which it left the interest rate at the same level - 0.75%. At the same time, there were surprises. Two members of the Monetary Policy Committee - Michael Saunders and Jonathan Haskel - unexpectedly voted to cut the rate by a quarter point, citing risks for the forecast and signs of a reversal in the labor market. These are the first voices in favor of easing monetary policy since 2016.

Against this background, the pound depreciated against the US dollar by 0.25% to $1.2805, reaching the lowest level in almost two weeks.

The UK received a deferral of Brexit until January 31, 2020. The Bank of England is expected to abstain from active actions until the end of this period.

In anticipation of the early parliamentary elections scheduled for December 12, the results of public opinion polls for the pound could be much more important than monetary policy or economic data.


The election campaign officially started in the country the day before.

According to a consensus forecast by analysts recently surveyed by Reuters, the victory of the Conservative Party will lead to a "divorce" agreement between London and Brussels, resulting in a GBP/USD pair growth by 3%, while Labour will cause the pair to fall by 2%.

According to various estimates, the advantage of Conservatives over Labour is now from 12 to 17%. However, as analysts warn, this may not be enough for Boris Johnson to guarantee his party more than half of the 650 seats in the House of Commons. According to them, amid the dissatisfaction of voters with the actions of the leadership of the Conservative Party and the absence of a clear program for the Labour Party, the outcome of the upcoming elections and the fate of Brexit will also depend on how widely the British support the parties supporting the preservation of EU membership.

The current correction of GBP/USD in the context of the political landscape of Great Britain, which remains unsteady, seems quite logical.

It should be noted that November is far from the best month for the pound. According to its results, in 1975-2018, the British currency against the US dollar depreciated in 28 cases out of 44.

It is assumed that the lower the pair starts to fall, the more there will be those who want to buy it cheaper.

The odds of a disordered Brexit have fallen to nearly zero. Based on the fact that according to the results of the early elections, the UK will leave the EU on the basis of an agreement or even remain part of the EU, it makes sense to form longs for GBP/USD to reduce support quotes by 1.2725–1.275 and 1.259–1.261 .

The material has been provided by InstaForex Company -