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Under the Pressure of the Domestic Political Crisis in the UK

10/24/2022 12:48 PM

The GBP/USD pair shows ambiguous dynamics, retreating from its local highs from October 18 and being around 1.1345 ahead of the upcoming changes in the political leadership of the United Kingdom.

This week can be seen as the official start of a new race for prime minister after incumbent and Conservative Party chief Liz Truss announced her resignation amid widespread criticism of her proposed tax reform. Currently, only one real favorite is known – the former finance minister Rishi Sunak, supported by most current officials (178 out of 357 deputies). In turn, former Prime Minister Boris Johnson, who announced his readiness to compete for the post on Friday, has already fallen out of the race, having failed to enlist the support of at least 100 party members and gained only 59 votes. The electoral process must be completed by October 28. Today will be presented data on business activity in the manufacturing and services sectors, from which analysts expect a continued decline from 48.4 points to 48.0 points and from 50.0 points to 49.6 points, respectively.

The US dollar is holding around 112.000 in the USD Index after the statement of the head of the Federal Reserve Bank of Philadelphia, Patrick Harker, that inflation in the country will remain at high levels for some time to come, regardless of the "hawkish" actions of the US Federal Reserve, and its slowdown may take the next 14 months. The official noted that the regulator does not plan to stop at the 4.00% interest rate level before pausing monetary policy tightening in 2023.

The trading instrument moves within the long-term downward channel toward the resistance line.

Technical indicators maintain a weakened sell signal: the range of EMA fluctuations on the Alligator indicator has narrowed almost completely, and the histogram of the AO oscillator is forming bars in the buy zone.

Resistance levels: 1.1480, 1.1800. | Support levels: 1.1178, 1.0925.

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