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Investors continued to sell sterling, taking the currency within pips of its pre-election low. Theresa May spent most of her time after the election apologizing to her party members, especially those who have lost their seats. She said “I got us into this mess and I’m going to get us out,” but no amount of damage control at this point could change the current situation. She’s still at risk of losing her job and as she said today, “I’ll serve you as long as you want me,” which may not be very long. The Queen’s decision to delay her speech to Parliament suggests that she believes there could be more leadership changes. All of this ongoing uncertainty is weighing heavily on the currency and will most likely overshadow this week’s economic reports and Bank of England rate decision. If the Prime Minister steps down we could see another leg lower in the pound. Inflation data is scheduled for release tomorrow and with commodity prices falling, slower price growth is expected all around. If political troubles are combined with softer data, GBP will sink further taking GBP/CHF down with it.
Technically, the 20-day SMA has just moved below the 100 and 200-day SMA, which is negative for the currency. The break of 1.23 exposes the currency pair to the March low of 1.2215 and possibly even a drop down to the 61.8% Fib retracement of the Oct 2016 to May 2017 rally at 1.22.