GBP/USD moves off daily lows but pound remains under pressure

• Pound trims losses but still among the worst performers. 
• Political uncertainty continues to weigh. 

The GBP/USD pair moved off daily lows and rose from 1.3090 to 1.3134 during the last hour reaching the highest level since the Asian session. Then it moved back toward 1.3100/10, where it was trading 75 pips below Friday’s close. 

The recent up-move was triggered by a modest recovery of the pound across the board. Still, it remains weak across the board and under pressure. Political uncertainty in the UK intensified as PM May chances of facing a leadership challenge rose significantly. Brexit negotiation concerns add more drama to UK politics. 

“At the start of this month, the BoE indicated that it was in no rush to follow up its 25 bps rate hike. This clears the decks for politics to be the most significant influence on the pound in the remaining weeks of the year.  Near-term, GBP is clearly vulnerable to political uncertainty and over the medium-term politics is likely to ensure that volatility is heightened”, wrote analysts from Rabobank. 

In a report just released, the IHS Markit Business Outlook survey revealed that UK business confidence picked up slightly since June, “but private sector firms still remain more cautious about their growth prospects than at any other time in the past six years.”  The Brexit and the political drama could limit not only any rally of the pound but also the economic recovery. 

Technical levels 

“Technically, the short-picture shows that the bearish momentum eased, but also that the risk remains towards the downside, as in the 4 hours chart, the price is well below a bearish 20 SMA, and below the 23.6% retracement of the latest daily decline. The Momentum indicator is aiming marginally higher below its 100 level, but the RSI maintains its slope downward around 41, favoring a new leg lower, particularly on a break below 1.3060,  ahead of the 1.3026 level, October monthly low”, said Valeria Bednarik, Chief Analysts at FXStreet.

To the upside, the immediate resistance is now seen at 1.3135 (European and US session high) and above the FXStreet's technical confluence indicator identifies 1.3165 (Nov 9 high) as a strong area, before the 1.3200 handle.