The robust performance in GBP/USD has largely been a by-product of a softer USD, albeit with some help from an unwind in short GBP positions. However, with Cable essentially moving in a straight line since the turn of the year, now that the pair backed off its 200DMA (1.3736) and 55WMA (1.3745), there would need to be a fresh positive impulse to break above. Although, as the revelations continue over No 10 flaunting lockdown rules over the past 2yrs, Boris Johnson is facing the toughest time in his premiership. According to bookmakers, he is 70% priced in to be ousted this year and the pressure may continue to mount depending on the conclusion in the Cabinet Office inquiry, where a damming verdict may prompt Tory MPs to send their letters in for a vote of no-confidence, of which 54 letters are needed to force a vote.
So far, political instability risks have had little to no impact on the Pound, with EUR/GBP relatively unchanged for the week. However, should the ousting of Boris Johnson become a real possibility, I would suspect fast money traders to spark a modest pullback in the Pound, before focus turns towards who is next in line. At which point, the initial downside would be short-lived.
GBPUSD Chart: Daily Time Frame