The British pound is weak and wobbly following disappointment that Prime Minister Theresa May was unable to secure a Brexit deal on Monday.
Talks were brought to an abrupt halt after Northern Irish politicians threw a spanner in the works with their objections to border proposals. Although May is currently fighting hard to save the deal after the DUP veto, anxiety is likely to heighten as the Brexit clock ticks. With domestic political woes and Brexit uncertainty both weighing heavily on buying sentiment, the British pound is likely to be exposed to further downside losses.
Steering away from political developments, activity in Britain’s service sector dropped more than expected in November, eroding optimism over the British economy. UK Services decreased to 53.8 in November, down from 55.6 in October as volumes of new work eased and prices rose. The mixed market reaction towards November’s soft Services PMI suggests that investors are overlooking the fundamentals and focusing instead on politics and Brexit developments.
Taking a look at the technical picture, the GBP/USD bulls look exhausted and vulnerable on the daily charts thanks to Brexit uncertainty. Technical traders will continue to observe how prices react around 1.3400, with sustained weakness below this level opening a path back towards 1.3300. For bulls to snatch back control, the GBP/USD needs to break back above 1.3500.