GBP/USD Forecast a technical analysis ► review of the major events that move the British Pound (Sterling), and especially pound/dollar (cable) during the week. Here is some general information. Scroll down for the latest GBP/USD outlook
GBP/USD is one of the most traded currency pairs in the world and certainly one of the oldest. The nickname “cable” originates from the fact that the exchange rate was transmitted over the telegraph cable between Great Britain and the USA.
High volatility characterizes sterling/greenback trading. In comparison to some of its peers, stop-loss orders are usually placed at wider margins.
Another characteristic of British pound trading is that the pair “front-runs” economic releases from the UK. We often see a strong market movement ahead of publication. Rumors, leaks or sheer nervousness move GBP USD
The pound is a “risk” currency. When the global mood is positive, GBP tends to gain against the USD, albeit usually not at the same magnitude as commodity currencies. When doom and gloom return to markets, the pound is on the retreat.
Brexit and GBP/USD
The biggest market mover of GBP/USD is the surprising decision of voters in the United Kingdom to leave the European Union. This unprecedented move shook up not only UK politics (the resignations of David Cameron, Nigel Farage, and Jeremy Corbyn’s struggles) but also Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985. Post-Brexit GBPUSD forecasts vary by timeframe.
The pound dropped once again after PM Theresa May talked about a “Hard Brexit”. Markets want more access to the single market, but the government prefers more border control.
Contradicting forces are tearing the pound apart. The economic data came out better than expected (retail sales, inflation and even PMIs rebounded). On the other hand, talk of a “Hard Brexit“, aka, abandoning the single market, certainly weigh on sterling.
The triggering of Article 50 on March 29th is testing the extreme short positioning against the pound.