It’s obvious that a currency is the first victim of any political uncertainty. After last week’s rally of GBP/USD reaching highs of above 1.43 the highest level since the Britons voted to leave EU. The result of the recent drop is due to the political turmoil in the U.K. government, during the weekend January 27th – 28th. Theresa May’s future as leader is threatened after conservative lawmakers become divided over the approach of leaving the E.U. Apart from the government’s political discord we had a statement from U.S. President Trump criticizing Mrs. May that she should hold a “tougher stand”
On the one hand we have the political turmoil pushing GBP lower, on the other hand we have inflation numbers pushing BOE into a faster normalization process and a possible rate hike in the coming months, something that pushes GBP higher.
In a technical point of view, we see GBP/USD coming back to its uptrend channel created since January 2016. In my point of view is not wise to sell GBP/USD. I prefer to sit on the side and waiting a better level to buy the pair around 1.3820 and 1.3600