Sterling has not been overly impacted by the news of Tory sleaze but this may change if the news worsens and if international coverage of UK political skulduggery increases, Jane Foley, Senior FX Strategist at Rabobank, reports.
See – GBP/USD: Britain's political issues to limit sterling gains – Westpac
Pound highly unlikely to remain unmoved amid PM Johnson's scandals
“While the PM and his allies are trying to turn the focus of the press and the electorate back to the country’s affairs, Johnson may not be able to escape quickly. On May 26, his former close ally Cummins is due to appear before parliament’s joint Health and Science committee inquiry into the government’s Covid response. Given the accusations contained in Cummin’s blog last week regarding the PM, it is clear that he has something to say. While the pound is largely dismissing political risk right now, this scandal could yet knock confidence in Johnson's ability to ride out political storms.”
“On the upside, anecdotal evidence suggests that the partial re-opening of the UK economy on April 12 has boosted consumption. This factor combined with the continued rapid vaccine rollout and the current low incidence of COVID-19 in the UK at present are all supportive for growth.” “Investors will be watching the May 6 BoE meeting for any signs of an improvement in confidence which could have the potential to support the pound.”
“Cable likely to face psychological resistance at the 1.40 level with the 100 day SMA at 1.3757 likely offering support. EUR/GBP remains at the upper end of its April range with resistance at 0.8720.”