GBPUSD Price Recovery Likely as UK Political Fears Subside

GBP price, news and analysis:

  • The British Pound fell sharply Monday as two senior UK government ministers resigned over Brexit.
  • However, the GBPUSD price has rallied since then and its rebound could well continue.

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GBPUSD rally in focus

The British Pound has rallied after tumbling Monday on news of the resignations of two senior UK government ministers over Brexit, and that bounce could well continue as the chances of a leadership challenge to Prime Minister Theresa May diminish.

The resignations of Brexit Secretary David Davis and Foreign Secretary Boris Johnson prompted talk Monday of a coup to oust May as head of the ruling UK Conservative Party. However, it now seems that the rebels pushing for a hardline stance on Brexit have too few supporters to push May out – and that is benefiting GBPUSD.

Moreover, that rally could continue as the prospects of a leadership challenge ebb and attention turns to the UK government’s Brexit “White Paper” to be published Thursday.

GBPUSD Price Chart, Hourly Timeframe (June 28 – July 10, 2018)

Chart by IG

Arguably, the UK political turmoil is now fully priced in to the GBPUSD price and will not deter the Bank of England’s monetary policy committee from increasing UK interest rates next month. The probability of a quarter-point rate hike to 0.75% is currently 61.5% according to the overnight index swaps market.

Moreover, the British Retail Consortium published healthy retail sales data Tuesday, suggesting that England’s progress in the football world cup and good weather in the UK are boosting High Street buying and will benefit UK economic growth as a whole – keeping rates on an upward trajectory.

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— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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