There are only trembling hands, due to the fact that today's parliamentary elections in the UK did not allow the pound to rush up after the single European currency. Nevertheless, there was a reason for this. Although inflation in the United States increased from 1.8% to 2.1%, with a forecast of 2.0%, and the Federal Reserve kept the refinancing rate unchanged as expected, the position of the dollar still weakened. The whole point is that everything is in Jerome Powell's words that, if necessary, the Federal Reserve System can expand the asset repurchase program to include short-term government debt securities. In other words, the Federal Reserve made it clear that it would stimulate the economy not by lowering interest rates, but by direct infusion of money. This method is much more simple, and most importantly, instantly affects the supply of money, and always has a negative impact on the exchange rate of the national currency. That is exactly what happened to the dollar yesterday. There was only a hint that the Federal Reserve System would resort to this method. However, the pound was not very willing to grow, as it was mentally preparing for today's election.
Today, the focus of attention is on parliamentary elections of UK, and until the preliminary results of the vote are known, the market will obviously stand still. Moreover, the intrigue is not whether the conservatives will win, but how many votes they will gain. If Boris Johnson managed to get enough votes to form a government without any support, as well as to pass the necessary bills through the House of Commons, then investors will regard this as an exceptionally positive factor. After all, this implies that Brexit will go according to plan, and no surprises are expected. However, if the victory of the conservatives is not so convincing, and it will be necessary for any bills to enlist the support of other parties, or Labor in general, then the epic from Brexit will be delayed, although we do not understand till when. This means growing uncertainty, which is harmful to investment, and therefore, investing in the pound is not worth it yet. In other words, the second option will lead to a significant weakening of the pound. And judging by opinion polls, the second option is more likely. Although it's too early to talk about it since the polls are not yet closed, and the market will take a wait-and-see position.
The pound/dollar pair will be at 1.3200 during the day, and the movement will begin immediately after the appearance of the first exit polls. However, the significant overbought pound that has been recently accumulated has limited its growth potential, so that it will not be able to break through the resistance level at 1.3250. On the other hand, the potential for reduction is much greater, and the resistance level is located at around 1.3125.
