Taking A Pounding
Today’s Spotlight Market
The British Pound abruptly reversed course from a recent upwards run. This comes as a bit of a surprise as much of the selloff was not due to any significant economic news. On Friday, the UK Office of National Statistics announced second quarter economic growth had expanded by 0.7%.
Fundamentals
There is a great deal of political uncertainty in the UK right now, which might be on the minds of traders. The Conservative party currently holds a slim 16 seat majority in the House of Commons. With such a small majority for the Conservatives, they cannot afford to lose many of those seats and still maintain their majority. Over the course of a 5 year parliament, resignations and/or deaths of Members of Parliament are inevitable, and the resulting by-elections will be closed watched. However, the opposition Labour party is in the middle of a highly divisive leadership election. The results of that election will be closely watched. In the event that the Conservatives lose their absolute majority in Parliament, they can attempt to maintain power by forming a minority government or by finding a coalition partner. If neither of these prove successful, new elections will called, perhaps well in advance of the next required election date of May 2020.
Technical Notes? -? View Today’s Chart
Turning to the 3 month continuation chart, we see several bearish signs. After dropping below the 20 and 50 day Simple Moving Averages (SMAs), the British Pound has made a series of lower lows and lower highs. Looking back a bit further, the recent rally was unable to reach the previous resistance level of around 1.590. The 20 and 50 day SMAs are converged right now, but heading in a downward slope. Finally, 14 day Relative Strength Index (RSI) is a bearish neutral 37.17.
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