Where next for the GBP following Theresa May’s Conservative Parties disastrous performance in yesterdays General Election?
As anticipated the GBP plunged as soon as the 22:00 exit poll numbers suggested (correctly) that the night would end up a Tory win but no working majority as we predicted yesterday.
I expected to wake up this morning and see the GBP/USD somewhere near 1.25 and the fact that we are not down further suggests the markets are still absorbing the impact of this result.
The reason why the GBP has not fallen further is Brexit. This result would suggest that Mrs May’s hard line Brexit approach has been rejected by country. Labour very much prefer a soft Brexit with concessions to the European Union in order to maintain access to the single market and softer immigration controls. A softer Brexit will be GBP supportive.
Although all the analysis has not been completed it looks initially that Labour have galvanized the 18 -26 year olds and they have voted in large numbers for Jeremy Corbyn. This age group has the most to gain or lose once we leave the European Union and their voice will need to be heard once negotiations get under way.
So where next for the GBP?
With so much uncertainty and with Theresa May not having a working majority a fresh General Election later this year cannot be ruled out if the Tories cannot form a coalition government which looks an impossibility with a look at the current political landscape .
This must weigh heavy on the GBP and its hard to see any reason for the GBP to strengthen from current levels although oversold conditions will have to unwind before the next bought of selling.
A good trading tip is to wait for the price to hit the 200 sma on the 1M1 time frame. Every time the price hits the 200 then SELL with a 15 pip STOP above the line.
Once the trade makes some progress then move your STOP to break even. If the trade makes progress move your STOP accordingly and lock in profit.
With luck you may catch the next leg down.