Macro update – UK Election Impact on GBPUSD

The UK election is done, and a new Labour government with a very strong majority is in power.

This election gives the UK political stability, something that is in short supply in some other major economies, which could impact the GBPUSD pair.

There was little reaction in GBP pairs as the result was a foregone conclusion. We now move to trading what comes next, and that’s what the new government does with taxes and other fiscal policies. Investors will be keenly watching how these policies will affect trading GBPUSD. However, the full impact won’t be known for some time.

What might come sooner are comments from the Bank of England now that the election is past, and their purdah will soon come to an end. They may be lining up to update markets on their latest thoughts on monetary policy, which could also influence GBPUSD. The market will want to know whether they are closer to a cut or not, with the next meeting coming in August.

For now, GBPUSD remains mildly bid but stays within this tight 1.26-1.28 range. We shift focus to the US data today. Bad data will likely see the range tops tested, potentially even leading to a move to the March highs at 1.29. Good data will see a dip, but that might be limited by the current GBP positive mood and the fact that the market is seeing weakening data in other sectors of the US

GBPUSD 4 hour chart

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