GBPUSD has recuperated toward 1.2000 in the early European daytime following Tuesday’s precarious drop yet neglected to save its force. The political show in the UK and developing downturn fears ought to keep on burdening the pair in the close to term.
Gas costs in the UK hit three-month highs on Tuesday with the continuous strike at Norway’s state-supported Equinor undermining further slices to UK’s gas imports. The British economy depends intensely on energy imports and it turns out to be increasingly more logical for the economy to tip into downturn before the year’s end, making the authentic lose interest.
Meanwhile, several Tory MPs, most notably Finance Minister Rishi Sunak and Health Secretary Sajid Javid, have quit British Prime Minister Boris Johnson’s government. Although Johnson can technically hold his position for another year after having survived the no-confidence vote, he is now facing heavy pressure. Although it’s difficult to figure out the implications of these political developments on the economic outlook, investors are likely to stay away from the pound amid heightened uncertainty.
Earlier in the day, Bank of England (BOE) Chief Economist Huw Pill noted that he would be willing to back more rapid rate hikes than the string of 25 basis point increases imposed so far, if data showed it necessary. This hawkish comment, however, failed to help the pair hold its ground.
Later in the day, the ISM Services PMI will be looked upon for fresh impetus. The Federal Reserve will release the minutes of the FOMC’s June monetary policy meeting as well. Meanwhile, US stock index futures are down between 0.15% and 0.2% on the day. The risk sentiment has been driving the dollar’s valuation and another bout of flight to safety could boost the greenback in the second half of the day and vice versa.
GBP/USD Technical Analysis
Static support seems to have formed at 1.0930 for GBP/USD. With a four-hour close below that level, 1.0900 (static level, psychological level) aligns as next support before the pair could target 1.0800 (psychologically level).
On the upside, first resistance is located at 1.2000 (psychological level, static level). The pair needs to flip that level into support in order to extend its correction toward 1.2050 (static level, 20-period SMA on the four-hour chart) and 1.2100 (psychological level).