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GBP/USD - Boos for Johnson
06.06.2022

The price movement of the GBP/USD pair has fallen into a “tug of war” scenario, with the market remaining undecided for multiple reasons. Over the past 4 trading days, the price movement has remained within a recurring price range, however, during today’s Asian Session, we saw it increase in value by 45 PIPs. But, it has not yet broken out of last week’s pricing.

The price of the GBP/USD currency pair is being influenced by each currency’s respective price movement. However, the price advance is mainly related to the Pound, which is seeing a similar price movement against all competitors. The US Dollar, on the other hand, is seeing mixed movements depending on the currency pair. Nonetheless, the US Dollar Index is slightly lower overall.

Technical analysts will be looking to see if the Pound is able to gain enough momentum to form a bullish breakout into a higher wave. At the moment, the Pound is showing signs of weakness, with the price recording lower highs but also consistent price lows. Traders may also anticipating to see whether the support level will potentially weaken as it is frequently being retested.

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The US Employment Sector

The US Dollar may continue to be influenced by Friday's employment figures which had both positive and negative releases. The NFP (Non-Farm Payroll) increased by 390,000, which is higher than the original prediction of 325,000. However, the unemployment rate did not decline to 3.5% as expected, but remained at the same level of 3.6%. However, the rate of unemployment being 3.6% is still considered healthy and not necessarily massively negative. The average hourly salary increased by 0.3%, and the average hourly wage, including bonuses, by 5.2%. In general, the position of the US labor market seems to remain stable, and it may continue to withstand the pressure of increasing interest rates.

In addition to the employment figures, investors also took note of comments made by Vice Chairman of the US Federal Reserve, Lael Brainard, last week. She said that rates will continue to rise until inflation levels return to normal, and no break in the tightening cycle is expected soon.

Crunch Time for the Prime Minister

The British Pound, on the other hand, seems to be influenced by politics - more specifically, by the lack of confidence in the current Prime Minister. This is not necessarily a new story but it has developed and gained momentum over the past week with many MPs and conservative members expressing a lack of confidence in Boris Johnson.

For the PM’s leadership to be challenged, the house will have to receive at least 54 letters of no confidence by solely Conservative Party members. According to political experts, this may be confirmed at the latest by Thursday or Friday. This political instability may potentially apply pressure on the Pound, however, it should be noted that Mr. Johnson has previously overcome similar battles. The market will, without doubt, be monitoring this and its influence on the Pound.

More Russian Sanctions

The market is also monitoring moves made by representatives of the UK to ban insurance of ships transporting oil from the Russian Federation as part of the sixth package of sanctions imposed against the backdrop of the military conflict in Ukraine. The government's decision will block the ability of Russian ships to use the services of Lloyd's of London, which is considered the largest association of individual insurers and brokers in the field of shipping, which will significantly limit their ability to export resources. This has also spiked concern of increased pressure on the energy sector as well as the economy.

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