The pound remains under pressure. GBP/USD is already over 300 pips below the peak of 1.4345 that was seen last week. Sterling was the big winner last week, taking full advantage of the US dollar weakness, and now it is one of the biggest losers.
Update: the pressure mounted and GBP/USD fell below the round line – now at a low of 1.3989.
Internal politics were a cause of worry yesterday, sending the pound to lower ground. PM Theresa May is facing growing signs of an internal revolt within her Conservative Party.
These worries were joined by issues with Brexit. May said that there is still quite a distance between the sides in the Brexit talks. A similar, more pessimistic tone, was also heard by EU Chief Negotiator Michel Barnier. He stressed that the UK must accept EU rules during the transition. And not surprisingly, this transition period will run through 2020.
The pound did get some good news from the opposition: Labour leader Jeremy Corbyn, seen by some as “Prime Minister in waiting”, met with industry groups and said that “everything is on the table” regarding Brexit, apart from a second referendum. This is good news for the UK economy and the pound.
Greenback comeback continues
It is also important to note that the US dollar remains in recovery mode: the greenback comeback continues, albeit in a more mixed manner than yesterday.
We will later get a few figures from the UK: net lending to individuals, M4 money supply, and mortgage approvals.
GBP/USD has reached a low of 1.4012 so far. While the round 1.40 level is eyed by many, real support awaits at 1.3950, a level that capped the pair on the way up. 1.38 is the next level. On the topside, 1.41 is notable.
More: Elliott wave Analysis: USDJPY and GBPUSD