GBP/USD flat, unable to benefit from USD weakness

GBP/USD is about to end the week with modest gains, ahead of the UK election. The pair was able to recover part of last week losses, when it dropped affected by polls. It is about to end trading around 1.2880. 

During the day the pair tested several times levels on top of 1.2900 but it was rejected. The weakness in the US dollar following the NFP was not enough to push cable to the upside. The US Dollar Index fell to the lowest since November amid a rally in Treasuries. Investors and traders remain cautious regarding the pound ahead of the elections. 

Range trading could persist until Thursday. To the upside, two relevant resistance areas could limit the pair: the 20-day moving average at 1.2920 and 2017 highs at 1.3040/50. On the downside, supports are seen at 1.2830 and 1.2750/55.

Key weeks ahead

In the US, next week there will be no major economic releases. After today’s NFP all eyes point toward the June 13/14 FOMC meeting. 

The story is different in the UK. Politics will be the decisive event with general election taking place on Thursday (June 8).  The latest polls showed that the lead of the Conservative Party over Labor narrowed significantly. The result could bring political uncertainty and affect financial markets. Elections will be held almost one year after the Brexit vote, that triggered a decline of more than 10% in the value of the pound. 

Opportunities and Risks for the UK Economy – Key Drivers Moving Forward