The British pound has extended its gains for a third straight day. In the European session, GBP/USD was trading at 1.3736, up 0.23% on the day.
There are no tier-1 events out of the UK today, so market participants will have to wait until Friday for a data dump which includes the monthly GDP report and Manufacturing Production.
That doesn’t mean things are dull in the UK, with Boris Johnson and Brexit in the headlines.
Are the knives being sharpened for Boris?
There have been some key political developments which could have an impact on the financial markets. First, Prime Minister Boris Johnson is fighting for his job, after admitting that he broke COVID regulations by attending a party at his residence in May 2020, in the middle of a lockdown.
Johnson’s claim that he thought it was a work event has been met with ridicule, and most serious for him, some senior Conservatives have joined in calls for his resignation. This latest escapade may prove to be one scandal too many for the feisty prime minister. An official inquiry into the matter will be published next week, and the verdict could determine whether Johnson remains as prime minister.
The conundrum over Northern Ireland will again be tackled, as the UK and EU are holding talks on how to avoid a hard border between Northern Ireland and Ireland, and reaching an agreement on border checks between Northern Ireland and the rest of the UK. The sides have not been able to make much progress until now, but a surprise break though would bolster the pound.
In the US, all eyes are on the December PPI, after headline CPI for December jumped 7.0% YoY. Despite the high reading, investors were calm as the number matched the forecast, and GBP/USD posted strong gains after the CPI release.
GBP/USD Technical Analysis
- 1.3650 has switched to a support role as GBP/USD continues to climb. Below, there is support at 1.3482
- GBP/USD is testing resistance at 1.3708. This is followed by resistance at 1.3818