Volatility Ahead For Pound Sterling As UK Set To Announce New Prime Minister
BlackBull Markets | Aug 31, 2022 07:25PM ET
As the UK will announce a new Prime Minister on Sept. 5, we might expect heightened volatility in the GBP in the days before and after the election result. Moreover, the new policymaker has the potential to change the long-term trend of the pound, with the potential reforms conducted impacting the UK economy.
Only a few days remain until the new prime minister is appointed, so the current polls indicate the election's results projections, especially if the difference is significant.
Liz Truss is ahead of Rishi Sunak, with the 91% , according to The Telegraph.
Implications For Pound Sterling
Liz Truss stands out by having an agenda including popular policies, such as lowering taxes. On the contrary, Rishi Sunak is focused on tight fiscal policies, including raising corporate taxes.
Low taxes could push consumer prices even higher in an already high-inflation environment. The Bank of England will likely step in and raise the interest rate in response, potentially supporting the GBP.
Therefore, the GBP may strengthen if Liz Truss takes control of the UK government. The bearish sentiment for GBP may occur if Rishi Sunak wins.
GBP Technical View
The GBP bulls may want to look at GBP/JPY, as the yen has been weak across the board in 2022.
The pair is in a long-term uptrend, as the prices stay above 200-day MA. Since August, GBP/JPY has been consolidating under 50 and 100-day MAs, forming a triangle.
The breakout above the upper border and MAs around 163.0 may end the long-term correction and send prices to the 168.0 resistance.
Alternatively, GBP/USD could be an appropriate pair to go short if the pound weakens.
As seen above, the market is approaching COVID-19 lows near 1.14, with local resistances at 1.18 and 1.22.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.