GBP/USD hits year high

Now that the general election is out the way, sterling has seen its strength increase.

Euro notes
Source: Bloomberg

Greece makes latest IMF payment
So Greece have managed to pay the latest €750 million that it owes to the International Monetary Fund and have avoided defaulting – at least for the time being. As Greece continues to play dodge ball with the debt markets, it has merely stepped out of the path of one ball and straight into the path of another.

Nothing has fundamentally changed in the last 48 hours regardless of this latest payment. The noises coming out of Greece would lead us to the conclusion that, even with the likely implications of tougher austerity, the Greek public would still rather remain as part of the eurozone. The time for Syriza to increase austerity is now – the ability for either party to continue fudging the issue has now been and gone.

The run that EUR/USD enjoyed over the last six weeks has now ended. Once again, the issue of euro devaluation through the ongoing European Central Bank quantitative easing policy is the dominant issue. Although we have seen a move back below the overbought indicator, further falls look likely.

GBP/USD continues to grow
The UK election is now over and the fact that the country has a majority Conservative government should add a touch of stability to both equities and currencies. The one fly in the ointment is the issue of an EU referendum for the UK.

It is generally perceived that leaving the EU is not something that the Conservative party want to undertake, but that promising a referendum was a vote-winning move. In the short-term the fact that the country has this issue hanging over it might give the UK a little more room for maneuver when it comes to negotiations with the other member countries.

Before undertaking a referendum on this matter, the parties would need to embark on a period of voter education. This is because the general knowledge of the benefits the country gains from being in the EU are outweighed by a perception of Brussels always sticking its nose into our affairs.

At the moment GBP/USD is continuing to enjoy a period of increased strength, comparably against the dollar. But how long this lasts for will be dictated by how the first 100 days of this new government works and the political measures it decides to bring forward. I would continue to be biased towards finding selling opportunities.

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