Trading The GBP Ahead Of The Election


A cursory look at the cable does not reveal anything out of the ordinary. The GBP/USD pair is trading at 1.2882, down 0.02% or $0.0003. Over the course of 1 week, the GBP/USD pair has been rather stable with little vertical movement whatsoever. This is particularly surprising given the gravity of recent events taking place in the UK.

With the general election barely a few days away, currency traders are expecting significantly more volatility from the sterling. The above chart clearly illustrates that the cable is trading above its 200-day moving average of 1.258, and its 50-day moving average of 1.276. The trendline is bullish. For binary options currency traders, this translates into call options.

A caveat is in order: bullish sentiment only exists over the short-term.

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When it comes to trading the USD, there are several important points to bear in mind. For starters, the US economy is structurally sound. This means that GDP data, inflation data, manufacturing and services PMI, and employment-related info are on the up and up. While certain US metrics performed below expectation, the broad picture is one of a stable economy. That being said, the USD has weakened moderately in 2017.

Binary options currency traders routinely cite the US dollar index as a case in point. The current reading of the DXY is 96.67. The 52-week high of this index is 103.82, and the 52-week low is 93.02. The recent performance of the DXY is -0.75% over the past 5 days. Similar trends are evident over 1 month (-1.94%), 3 months (-4.61%), and the year to date (-5.58%).

If the USD is depreciating in value, the only way to gauge the performance of the cable is to see what the GBP is doing.

How Is the GBP Performing in the Run-Up to the General Election?

On Friday, 2 June, currency traders were quick to point out that both the US dollar and the UK sterling were the worst performing of the G10 currencies. The political uncertainty in the United Kingdom has been ratcheted up a level with Saturday’s horrific terror attacks, and the economic uncertainty in the US continues unabated. Trump Trade has taken a turn for the worse after the US pulled out of the Paris Accord, and no clear path to fiscal stimulus, tax relief, or effective monetary policy is taking shape.

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