Archived IMT (2010.05.11)

DAVID CAMERON IS THE NEW PRIME MINISTER as Gordon Brown stepped down and the Conservative Party takes over to form a coalition with the Liberal Democrats with the aim of attaining majority. GBP RALLIED right before London markets closed when Labour confirmed the breakdown in its talks with LibDems. GBPUSD POSTED ITS 1st DAILY GAIN in 7 days, eyeing the interim resistance at $1.5060, followed by $1.5120. ONLY WHEN THE NEW GOVT CONFIRMS a new majority in Parliament would sterling move onto towards the next leg of the rally and possibly retest $1.5150s. OTHERWISE TRADERS MUST BE AWARE OF the Bank of Englands quarterly Inflation tomorrow, which could dampen sterling gains if it reiterates that inflation will return below target. ALSO, Mervyn King's testimony after the report will be important for the GBP. Renewed downside towards $1.45 cannot be ruled out. medium term outlook suggests emerging resistance at $1.55As EURUSD slumps towards $1.2630s, EURGBP is expected to retest the June 2009 low of 0.84 after having broken below both the 55 and 100-week MAs 2 weeks ago. Only a weekly close below 0.8390 will be required to pave the way for 0.8280s.