GBP/USD retreats after Sunak effect relinquishment

The British pound retreats below 1.1300 after failure at the 1.1400 area. Traders and investors have broadly welcomed Rishi Sunak’s victory and markets hope to steady under his upcoming government.

The GBP/USD pair trades at 1.1278 at the time of writing. The asset aims at 1.11/1.12 if 1.1400. The sterling is depreciating moderately on Monday, despite the initial positive reaction to the news about the election of Rishi Sunak as the next Prime Minister.

The pair was rejected at the 1.1400 area and has been losing ground through the day to consolidate below 1.13 during the afternoon US session.

News that Boris Johnson retired from the Tory race to Downing Street, leaving the doors open for the market candidate, Rishi Sunak, triggered an immediate bullish reaction on the GBP and pushed UK bond yields higher in early trading.

The positive reaction, however, was short-lived and the pound lost traction as soon as the market came to terms with the challenges ahead for the UK economy. The soaring inflation coupled with the gloomy growth forecasts are likely to maintain GBP longs on check for some time.