GBP\/USD traded higher around 1.3405 in early European hours on Thursday, keeping a constructive tone above 1.3400 as UK political uncertainty ebbed. After Keir Starmer\u2019s late-June resignation, the formal contest to choose his successor starts on 9 July, with Andy Burnham positioned as the frontrunner and an expected timeline that points to 20 July for the next Prime Minister.<\/p>\n
On the daily chart, the pair remains above the Bollinger middle band and the 100-day SMA, while the Bollinger Bands (20, 2) are widening modestly. Momentum is mildly bullish, with the RSI (14) at 57.6. Upside resistance sits at the Bollinger upper band near 1.3470; first support is around 1.3300 at the middle band, and a deeper retreat would target the lower band near 1.3130.<\/p>\n
Given the easing political landscape in the UK, we see a constructive path for GBP\/USD in the coming weeks. The expectation of Andy Burnham becoming Prime Minister by July 20 is removing a key source of uncertainty that has weighed on the pound. We should therefore position for a gradual appreciation from the current 1.3405 level.<\/p>\n
This outlook is bolstered by recent economic data that supports a stronger sterling. The latest figures released this week show UK core inflation has cooled to 2.8%, its lowest level in two years, giving the Bank of England more breathing room on monetary policy. In contrast, last week’s US non-farm payrolls came in slightly below expectations at 195,000, hinting at a potential softening in the American labor market.<\/p>\n
To capitalize on this mildly bullish momentum, we are looking at buying call options or establishing bull call spreads with August expiries. A long 1.3400 call, perhaps funded by selling a 1.3550 call, seems appropriate to target gains towards the initial resistance near 1.3470. This defined-risk strategy aligns well with the steady but not explosive rally we anticipate.<\/p>\n
The current stability is a world away from the chaotic leadership transition of 2022, which saw the pound plummet towards parity with the dollar. This orderly political process provides a solid floor for the currency, making the 1.3300 support level a credible line of defense. Selling out-of-the-money puts with a strike near this level is another viable strategy to collect premium while expressing a cautiously optimistic view.<\/p>\n\n\n\n