GBP/USD: headed back below the 1.29 handle?

Currently, GBP/USD is trading at 1.2908, up 0.17% on the day, having posted a daily high at 1.2942 and low at 1.2860.

GBP/USD has been better bid at the start of June's business and despite the uncertainties of the forthcoming elections on the 8th. The pound is under the spotlight as is the UK economy in light of the recent atrocities of terrorism as well as Brexit. This election will determine the fate of the pound for the foreseeable future and as such, the 1.29 handle could come under pressure. 

The various scenarios could equate the following outcome in the pound:

• Conservative victory with Absolute Majority (Scenario 1)  - A Conservative victory with an absolute majority should be supportive initially for the pound. Stock markets would be relieved on the lower corporation tax outlook and a risk-on environment could be the expected outcome. However, with a focus on Brexit and PM May's hardline - "No deal is better than a bad deal" - approach to the negotiations, a hard Brexit outlook could equate to a bearish scenario to the pound eventually - (Note: Remain cautious of a 'buy the rumour sell the fact' trade - a Conservative victory is virtually priced in).
• Conservative victory without  - Absolute Majority (Scenario 2) With the narrowing of the polls and a trend that has been continuing, the possibility of a hung parliament should not be ruled out, (When no party has won enough seats to have a majority in the House of Commons). Such an outcome could be highly bearish for the pound due to the uncertainty for markets to deal with. However, in a hung parliament, the incumbent prime minister stays in office until it is decided who will attempt to form a new government - this could support the pound after an initial sell-off. (Note: A hung parliament does NOT necessarily mean a coalition government). 
• Laborist victory (Scenario 3)  - A balanced outcome for the pound with initial volatility on the basis of Labour’s manifesto. Initially, a lower pound could be the immediate outcome bias due to increased uncertainty and a reduction of inflows. However, a Labour victory should mean a softer Brexit outlook and austerity would be removed, (Fiscal easing lifting growth and inflation expectations). Higher real yields may offset the initial weakness in the pound.

GBP/UD levels

GBP/USD is neutral to negative very near term, according to analysts at Commerzbank explained that last week the market sold off to and is seeing a small rebound from the 1.2776 December high.  Since then, the market has rallied to 1.2940 but failures there open up prospects to losses towards 1.2598/84, the 100 and 200 day ma and the 1.2366 the 10th April low, argued analysts at Commerzbank, however adding, "where are we wrong? Intraday rallies are likely to struggle 1.2910/16 (20 day ma) and remain capped by 1.3060. Only above here would target the 1.3446 September 2016 high."