Parliament Return Could Cause GBP Weakness

  


Key Talking Points:

  • GBP/USD tightens its range but is lacking a clear direction
  • PM likely to face backlash as he attempts to raise National Insurance to pay for pandemic spending

Once again GBP/USD is struggling to stay above 1.3880 after a rather disappointing jobs data in the US last week allowed the pair to pick up some momentum after some extended weakness over the two weeks prior. The pair has started to see tighter swings but the short-term direction is still unclear, with support and resistance both playing a key role over the last few weeks. The aim for buyers will be to regain the 1.40 mark but there are some tough areas to crack along the way, starting with the 200-day and 100-day SMAs, which are converging between 1.3880 and 1.3920.

GBP/USD Daily Chart

GBP/USD Outlook: Parliament Return Could Cause GBP Weakness

Politics back in play

With a bank holiday in the US leaving the economic calendar slightly empty for the day, GBP/USD is likely to drift with overall market sentiment, which seems to be slightly mixed to start the morning. But the world of politics is likely to catch some attention as Parliament returns from its summer recess, with what is likely to be a rollercoaster ride for the Prime Minister. The pandemic has meant that many domestic problems have piled up over the last 18 months and with the country expected to have gone through the worst of it, it’s time to face the music and try and clean up.

The first item on the agenda is likely to be the PM’s intention to raise the national insurance tax, something to which he pledged he wouldn’t do in his 2019 manifesto, but that was before the world was turned upside down by Covid-19 and debt skyrocketed. No doubt he is likely to face some backlash and reshuffle, which would keep the Pound slightly sensitive over the coming week. But it doesn’t end there, with Afghanistan, inflation, supply and labour shortages, as well as the ongoing pandemic also on the table.

Retail trader data shows 49.35% of traders are net-long with the ratio of traders short to long at 1.03 to 1. The number of traders net-long is 0.86% higher than yesterday and 20.26% lower from last week, while the number of traders net-short is 1.84% higher than yesterday and 22.80% higher from last week.

Learn more about the stock market basics here or download our free trading guides.

— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin

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