Browsing: GBP USD Forecast

GBP/USD had another volatile week amid Brexit headlines and it managed to pull forward, also thanks to USD weakness. What’s next? Inflation and retail sales numbers stand out. Here are the key events and an updated technical analysis for GBP/USD.

Chief EU Negotiator Michel Barnier moved the pound once again by saying that reaching a Brexit deal within 6-8 is “realistic.” Contradicting reports from various officials maintained high volatility. The UK jobs report beat expectations with a rise of 2.6% in wages. Monthly GDP also came out better than expected in July:0.3%. The Bank of England’s decision was a non-event but Carney was in the spotlight after his term was extended to January 2020 and as he warned about the dire consequences of a no-deal Brexit.

Updates:

GBP/USD daily graph with resistance and support lines on it. Click to enlarge:

  1. Rightmove HPI: Sunday, 23:01. This House Price Index showed a sharp drop of 2.3% in August after a few stable months beforehand. A rebound is likely now.
  2. CB Leading Index: Monday, 13:30. The Conference Board’s measure is a gauge using seven indicators, most of them already published. A drop of 0.2% was recorded in June. The figure for July will likely be better.
  3. UK inflation: Tuesday, 8:30. The Bank of England raised rates in August after inflation had picked up. However, prices are not going anywhere fast. Headline CPI stood at 2.5% y/y in July and the figure for August is expected to be slightly lower, at 2.4% The recent rise in the pound will only be felt later on in inflation figures. Core CPI stood at 1.9% and 1.8% is expected now The Retail Price Index (RPI) was at .3.2% and the same level is predicted now. PPI Input advanced by 0.5% MoM and an increase of 0.4% is expected.
  4. Retail Sales: Thursday, 8:30. UK consumers were out shopping in July, with the volume of sales rising by 0.7%, better than had been expected. This important gauge tends to have a short-lived, yet a potent impact on the pound. A drop of 0.1% is projected now.
  5. Public Sector Net Borrowing: Friday, 8:30. The government had a net surplus of 2.9 billion pounds in July, better than had been predicted. A return to a deficit is on the cards now: one of 3 billion pounds is forecast.
  6. BOE Quarterly Bulletin: Friday, 11:00. This long document about the current economic situation provides more information about the data that BOE uses in making its decision. Some key elements in the report are already out. Nevertheless, it provides more information from the Bank, one week after the rate decision.

* All times are GMT

GBP/USD Technical analysis

Pound/dollar moved higher but and then tackled the 1.31 level mentioned last week.

Technical lines from top to bottom:

1.3375 was a high point in July. It is followed by 1.3315 that capped the pair earlier that month.

1.3215 was the high point for the pair in mid-July and a lower high on the chart. It is followed by mid-September peak of 1.3145.

1.3045 was a high point in August and also close to the initial 2018 low.

Below 1.3000 we find 1.2935, a high point in late August. 1.2865 separated ranges in late August. Further down, 1.2790 served as support late August and also beforehand.

1.2750 held the pair down when the pair was on the back foot. The current 2018 trough at 1.2660 is the next level.

1.2590 was a swing low in September 2017. Even lower, 1.25 is a round number and also worked as support in early 2017.

I am neutral on GBP/USD

While the EU is not being really flexible on Brexit, they are making the right noises and this keeps the pound bid against the strength of the US Dollar.

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GBP/USD Forecast and technical analysis ► preview of the main events that move the British Pound (Sterling), and especially pound/dollar (cable) during the week. Here are some general data. Scroll down for the latest GBP/USD outlook

Pound/dollar characteristics

GBP/USD is a major pair and certainly one of the first to emerge in modern trade. Its nickname “cable” originates from transmitting the exchange rate over the telegraph cable between the UK and the USA in the 19th century.

Above average volatility characterizes pound/greenback trading. In comparison to other major pairs, stop-loss orders are usually placed at wider margins.

Another tidbit of Sterling trading is that the pair “front-runs” economic publications from Great Britain. We usually see a significant market movement ahead of a release. Leaks, rumors, or sheer nervousness move GBP USD

The pound is a moderate “risk” currency. When the global mood is positive, GBP often gains against the dollar, albeit usually not at the same magnitude as commodity currencies. When markets become risk-averse, Sterling is on the retreat.

Brexit talks 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  Her Majesty’s currency. Brexit has sent Pound/USD to levels last seen in 1985 and despite the recovery, Sterling still suffers.

The economy did well in 2016, before and after the EU Referendum, but it slowed down in 2017. On the other hand, the weak pound pushed inflation above the rises in wages. The Bank of England decided to raise rates in November 2017 but clarified it is a one-off. Mark Carney and his colleagues foresee only two hikes in the next three years.

Brexit negotiations were deadlocked for quite some time, but fresh hopes help the pound stabilize. PM Theresa May may agree to pay the high “divorce bill” that the EU demands.

Latest weekly GBP/USD forecast:

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