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GBP/USD Daily Forecast – Sterling Brushes off Poll Results and Shows Strength

The latest poll results showed the Tories lead narrowing which caused some immediate pressure in GBP/USD. However, the pair is recovering, suggesting that the markets are not all that concerned.
Jignesh Davda
GBPUSD 4-Hour Chart

Brexit Polls Show Tories Lead Narrowing

With only one day left until the election, the race is getting tight as the latest YouGov poll shows a narrowing of lead the Tories have over Labour.

The report showed that if the election were held now, the Tories would win 339 seats while Labour would take 231 seats. The YouGov MRP poll from roughly two weeks ago showed the Tories winning 359 seats and Labour with 211 seats.

On balance, the report still points to the probabilities of a Conservatives majority. However, with the typical margin of error, a hung Parliament cannot be ruled out.

Prime Minister Johnson needs a majority to push forward on the Brexit deal he negotiated in October. If he is successful in the election, he intends to finalize a deal by the end of next month.

Johnson has also pledged to invest more into NHS, expand the police force, and implement a point-based immigration system.

Technical Analysis

GBP/USD extended higher to briefly trade above 1.3200 yesterday, however, the release of the latest poll results triggered a reversal.

GBPUSD 4-Hour Chart

The pair dropped just over a 100 pips from its high of the day until buyers saw value and stepped in. The pair looks to be fairly well bid in the early day and has erased about half of the decline from yesterday’s high.

I suspect the pair might make one more attempt to print a fresh high ahead of Thursday. Beyond that, it is much more difficult to speculate how the exchange rate will react just ahead of the election and following the results.

Some analysts say the pair has moved too far in pricing in a Tories victory and that the upside is limited. This could very well be the case, but at the same time, I don’t think it is prudent to start looking at bearish position, at least yet.

Bottom Line

  • GBP/USD came under a bit of pressure in late trading yesterday after the latest MRP poll showed the Tories lead narrowing.
  • The pair is recovering in the early day today. The technicals don’t point to a further downside continuation.
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