GBP/USD: Theresa May’s election gamble backfires, as voters delivered a hung parliament


GBPUSD Movement

For the 24 hours to 23:00 GMT, the GBP declined 0.34% against the USD and closed at 1.2732 on Friday, after results of UK’s general election showed that British voters have dealt a devastating blow to the UK Prime Minister, Theresa May, wiping out her parliamentary majority and sparking fears that the political turmoil could delay talks on leaving the European Union.

On the macro front, Britain’s industrial production rebounded less-than-expected by 0.2% on a monthly basis in April, compared to a fall of 0.5% in the prior month, while market participants had anticipated it to climb 0.7%. Moreover, the nation’s manufacturing production recorded a less-than-expected rise of 0.2% MoM in April, compared to market consensus for a gain of 0.8%. In the preceding month, manufacturing production had registered a fall of 0.6%. Meanwhile, the nation’s total trade deficit sharply narrowed to a level of £2.1 billion in April, compared to market expectation for the nation’s total trade deficit to fall to a level of £3.5 billion and following a revised deficit of £3.9 billion in the previous month.

Other economic data showed that NIESR, a leading think tank, estimated that UK’s gross domestic product (GDP) advanced 0.2% in the three months ended May 2017. In the February-April 2017 period, NIESR estimated GDP had registered a similar rise. On the other hand, the nation’s construction output unexpectedly declined 1.6% MoM in April, defying market expectations for a rise of 0.4%. In the prior month, construction output had climbed by a revised 0.7%.

In the Asian session, at GMT0300, the pair is trading at 1.2761, with the GBP trading 0.23% higher against the USD from Friday’s close.

The pair is expected to find support at 1.2669, and a fall through could take it to the next support level of 1.2576. The pair is expected to find its first resistance at 1.2821, and a rise through could take it to the next resistance level of 1.2880.

Going ahead, investors will keep a close watch on UK’s inflation report hearings, set to be released in a few hours.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

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