GBP/USD: Britain's political issues to limit sterling gains – Westpac

Easing of covid restrictions is coinciding with a rebound in GBP/USD but political uncertainty into the May 6th regional elections should cap GBP gains, analysts at Westpac appraise.

See: GBP/USD set to rally past the March high at 1.4018 – Commerzbank

Attention on BoE policy meeting and local and regional elections on 6th May

“Recent data underscored potential for a consumer-led recovery that more hawkish MPC members (Haldane and, less overtly, Broadbent and Bailey) have pointed to as potentially triggering a rip-roaring recovery. This will more than offset March’s benign inflation data. BoE is now likely to be confident in its current policy settings being appropriate until the recovery is assured.”

“Local and regional elections on May 6 pose material risks to the UK. Protest votes against Johnson’s Govt. would be unlikely to have any significant impact given its parliamentary majority, but it may increase pressure on Johnson given recent accusations of misconduct. More importantly for GBP is the risk of a sweeping win for SNP in Scotland and calls for another independence referendum.”

“GBP/USD is likely to remain within its recent effective 1.38-1.42 range until the 6th May.”