GBP - British Pound
Sterling suffered again on Wednesday, reaching 5-month lows against a number of its major peers. The political uncertainty surrounding PM May’s successor and the unexpected results for the Brexit Party in the European Parliamentary elections has weighed heavily on the pound. However, it is not all doom and gloom for sterling as investors gear up for a period of expected extreme volatility for the British currency as the uncertainty surrounding British politics and Brexit becomes more clear.
Many still believe that Sterling is undervalued however as currencies often drop lower than expected during downtrends, when investors are bailing out of risky positions. Over the coming weeks, the key support level for GBP/USD of 1.25 may be tested as negative political sentiment continues to weigh on the pound. All eyes turn to June 10th, when the race for PM May’s successor begins.
The Sino-U.S trade war continued to escalate on Thursday after China threatened to either ban or increase the price of exported rare earth materials to the U.S. Such materials are vital for the U.S technology industry as they are embedded in a wide range of day-to-day products like phones and computers.
The Eurozone is also experiencing the knock-on effect of the trade war, as Germany posted the largest one month increase in unemployment in the last 10 years. This is another blow for the slowing Eurozone, as this data joins Germany’s deterioration in job growth in the service and manufacturing PMI’s.
Safe haven currencies struggled to find any upside momentum on Wednesday, with yen landing at the bottom of the G10 pile.