Tactics and Analysis, July 12, 2017 – Pound Turns Ugly

The Pound saw significant selling pressure on Tuesday. This occurred even as the Euro gained against the U.S Dollar. The divergence of the Pound against the U.S Dollar and its weakness is a sign investors are growing concerned about Prime Minister May losing her grip on political power and what it could do to Brexit negotiations.

Theresa May’s Problems Hurting the Pound

The Pound saw a truly intriguing day of trading on Tuesday. As the Euro made significant gains against the U.S. Dollar, the Pound lost value. It has become clear the political problems of Prime Minister Theresa May are having an impact on investor sentiment.

May’s inability to get enough support for the tough Brexit negotiations, which will need to take place with the European Union have caused worries about the U.K’s economic capabilities. The Pound is now hovering above the 1.28 level against the U.S Dollar.

Tories Losing Grip on Power

The Pound had enjoyed a relatively good few months of trading. Investors at one point in this spring seemed to be ready to take the British currency to highs not seen since last summer. However, the political clout for the Tory government has been badly hurt because of the poor results it attained via the June general election in which it lost many seats in Parliament.

The Pound’s decline in value yesterday while the Euro made significant gains, may have been a one day event. But the divergence serves continued notice that not all is well for the British currency and its recent declines are concerning.

Further Declines Coming for Pound?

The Pound will need to be watched very closely in the days and weeks ahead. It appears Prime Minister Theresa May is losing her grip on political power at a dangerous rate. Other Tory party members, such as Boris Johnson, are beginning to take a bigger piece of the pie regarding their viewpoints being heard in the media.

Investors like clarity. If the political outlook continues to worsen for Prime Minister May it will not help the Pound in the short term. Economic data from the U.K has also taken a turn for the worse over the past week.

If the Pound breaks below the 1.28 support ratio against the U.S Dollar it could point to further declines and troubles for the British currency.

In the short term, we believe the Pound may be negative. In the mid-term and long-term we are unbiased.

Yaron Mazor is a senior analyst at SuperTraderTV.

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