Browsing: GBP USD Forecast

GBP/USD bookended the week with sharp gains, soaring 2.1 percent. Investors will be keeping a close eye on monthly and quarterly GBP reports, as well as manufacturing production. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.

Central banks were in the spotlight on Wednesday and Thursday, as the Federal Reserve and BoE held their monthly meetings. The BoE maintained interest rates, but BoE Governor Mark Carney had a hawkish message (warning?) for the markets. Carney said that there could be a number of rate hikes from the BoE, if Brexit is resolved and growth and inflation point higher. The markets have priced in just one rate hike until 2021. Carney’s comments sent the pound soaring on Friday.

In the U.S, the Federal Reserve stayed on the sidelines, maintaining the benchmark rate. The rate statement noted that inflation pressures are muted and that the FOMC would remain patient regarding future rate movements. Fed Chair Jerome Powell reinforced this stance at a follow-up press conference, saying “we don’t see a strong case for moving in either direction”. The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.

Central banks were in the spotlight on Wednesday and Thursday, as the Federal Reserve and BoE held their monthly meetings. The BoE maintained interest rates, but BoE Governor Mark Carney had a hawkish message (warning?) for the markets. Carney said that there could be a number of rate hikes from the BoE if Brexit is resolved and growth and inflation point higher. The markets have priced in just one rate hike until 2021. Carney’s comments didn’t make much of an impact on investors, as the pound has lost ground on Thursday.

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

https://www.tradingview.com/x/AgjO9WjP/

  1. RICS House Price Balance: Wednesday, 23:01. The Royal Institute of Chartered Surveyors continues to point to a drop in house prices. In March, 24% more surveyors reported a drop in prices, and little change is expected in April, with an estimate of 22%.
  2. Manufacturing Production: Friday, 8:30. This key indicator has posted strong gains of 0.9% and 0.8% in the past two months, easily beating forecasts. However, the markets are braced for a weak reading of 0.1% in March.
  3. GDP Data: Friday, 8:30. The initial release for Q1 is expected to show a gain of 0.5%, after a reading of 0.2% for Q4. The monthly GDP report dipped to 0.2% in February and the downward trend is expected to continue in March, with an estimate of 0.0%.

* All times are GMT

GBP/USD Technical analysis

Technical lines from top to bottom:

With the pound climbing sharply last week, we begin at higher levels:

1.3615 capped the pair in late 2017. The round number of 1.35 is a pivotal line.

1.3375 was a high point in July. It is followed by the round number of 1.3300.

1.3217 was the high point of the pound rally in late January.

1.3170 was a swing high in early November.

1.3070 was a high point in mid-November.

The round number of 1.3000 has strengthened in support after strong gains by the pound late in the week.

1.2910 (mentioned last week) is next.

1.2850 capped recovery attempts in late November.

I am neutral on GBP/USD

Despite the uncertainty surrounding Brexit, the British economy has been steady. Mark Carney’s comments about possible interest rate hikes was a vote of confidence in the resilience of the British economy. The U.S. economy remains strong, as underscored by solid GDP and nonfarm payrolls reports.

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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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