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Feb 19 - 09:55 PM

GBP/USD - COMMENT-PM Sunak's Authority May Be Tested As Sterling Slips

By Andrew M Spencer  —  Feb 19 - 08:35 PM

The extreme gloom on the outlook for Britain's economy is easing, but sterling could come under pressure if there is renewed political turbulence as the end game for Brexit approaches.

UK assets are back in demand and a string of improved data last week added to the brighter picture, with stronger-than-expected UK jobs and retail sales, combined with softer inflation.

Bearish sentiment towards the UK could return if Prime Minister Rishi Sunak reaches a Brexit deal with the European Union, which is rejected by the intransigent Conservative Party Brexiteers and the pro-UK Democratic Unionist Party. EU-UK negotiations on the Northern Ireland protocol made good progress last week and Sunak said "intensive work" was needed this week to reach a resolution.

Turbulence in parliament could undermine Sunak's leadership. However, if he manages to steer the deal through, it would cement his authority to lead the Conservatives into the next election.

Technically the GBP/USD outlook is bearish as 5, 10 and 21-day moving averages, plus Bollinger bands trend south, as momentum studies edge lower. These signals target a test of the 1.1842 2023 base.
A close above the 1.2189 falling 21-DMA, which capped last week, would end the downside bias.

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Refinitiv IFR Research/Market Commentary


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