GBP/USD is down 0.3% on the day to 1.2110 but the real show of pound weakness this week comes from the jump higher in EUR/GBP as the pair rises to its highest levels since May:
EUR/GBP daily chart
The break above 0.8700 and the 200-day moving average (blue line) in trading yesterday was notable, allowing for buyers to set up the next leg upside leg we’re seeing now.
In part, the weak UK retail sales data today is playing a role in the added momentum but there’s also some UK political uncertainty creeping in as well. The Labour party pulled off extremely surprising by-election wins and is a sign that majority of the British people are perhaps seeking change – one form or another.
To paint some colour to the picture, the result in Tamworth is the second-biggest swing from Tories to Labour since WWII while the result in Mid Bedfordshire represents the biggest majority to be overturned (it was 24,664 votes in favour of the Tories four years ago) at a by-election.
Going back to the pound, the break higher in EUR/GBP bodes ill for the currency and that could set off added weakness especially if UK data continues to underwhelm in the weeks ahead.