The British pound is stuck between a rock and a hard place. The fallout from the UK elections is devastating for the pound, which extends its falls on 4 developments. What’s next? Here are two opinions:
Here is their view, courtesy of eFXnews:
GBP: UK Elections: GBP/USD To Test 1.2515 En-Route To 1.2100 – UOB
UOB Research comments on GBP direction in the aftermath of the UK elections noticing that volatility in the GBP should continue as positions set leading to the event are being readjusted.
“Similar to the Brexit vote last year, markets were positioned for a favourable outcome – Conservatives winning with an enlarged majority.
….GBP/USD should see a break below today’s session low of 1.2695. However, compared to Brexit day where the pair fell as much as 11% intraday, an election outcome is unlikely to share the same deep impact on the economy and currency as Brexit does. A move half the magnitude this time round may bring us eventually to 1.2100. Before that, GBP/USD looks set to first test key support of 1.2515, day low on the day (April 18) Theresa May called for snap elections,” UOB argues.
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GBP: UK Elections: Downside Risk N-Term; Not A Buy Yet – BTMU
BTMU FX Strategy Research notes that the rise of softer Brexit speculation is another reason why the pound has not declined more sharply following UK general election result.
“Overall we continue to judge that the risks are now more tilted to the downside for the pound in the nearterm on the back of heightened political uncertainty and the potential for even more complicated Brexit negotiations.
We would need to see the emergence of concrete evidence of a shift to a softer Brexit stance to buy into the potentially more bullish outlook for the pound,” BTMU argues.
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