GBP/USD clings to strong gains, above mid-1.3100s

The buying interest around the British Pound remained unabated, now lifting the GBP/USD pair back above 50-day SMA in the region of fresh daily tops.

Currently trading around mid-1.3100s, the pair gained some positive traction at the start of a new trading week and recovered over 125-pips from one-month lows touched on Friday. 

The British Pound benefitted from the latest political development, where in lawmakers in the UK PM Theresa May’s Conservative Party, who are trying to oust her as leader, have been told to “put up, shut up” by the party’s chief in Scotland.

The Sterling got an additional boost after the UK’s Office for National Statistics (ONS) announced its correction on employment inflation data and raised the Q2 unit labor costs to 2.4% from the previous estimate of 1.6% (y/y). The upward revision reinforced market expectations that the Bank of England would hike rates at the November meeting and remained supportive of the strong bid tone surrounding the British Pound.

With the US markets closed in observance of Columbus Day, a follow through up-move, backed by some additional short-covering, now seems a distinct possibility. All eyes now remain on the UK PM Theresa May’s speech scheduled at 14.30GMT for fresh trading impetus on the prices.

Technical levels to watch

Immediate resistance is pegged near the 1.3200 handle, above which the recovery move could get extended towards an important hurdle near the 1.3230-35 region. On the flip side, 50-day SMA, near the 1.3135 region, now becomes immediate support to defend, which if broken would turn the pair vulnerable to slide back below the 1.3100 handle towards its next support near the 1.3070-60 region.