Browsing: GBP USD Forecast

GBP/USD started the New Year with some swings, but ended the week almost unchanged. The key events in the upcoming week are GDP and Manufacturing Production. Here is an outlook for the highlights of this week and an updated technical analysis for GBP/USD.

The pound was down sharply after New Years’ Day, as fallout from the Apple revenue warning sent the equity markets tumbling and sent GBP/USD sharply lower. However, the pound managed to recoup most of these losses before the end of the week.

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

  1. Halifax HPI: Tuesday, 8:30. This housing inflation indicator has struggled, posting two declines in the past three months. The indicator is expected to rebound in December, with an estimate of 0.5%.
  2. NIESR GDP Estimate: Wednesday, Tentative. This monthly gauge of GDP fell to 0.3% in November, its lowest reading since June. Will we see an improvement in December?
  3. BoE Governor Carney Speaks: Wednesday, 15:30. Carney will deliver remarks at a BoE event. A speech that is more hawkish than expected is bullish for the pound.
  4. BRC Retail Sales Monitor: Thursday, 00:01. This indicator gives an indication of the strength of consumer spending, a key driver of economic growth. The indicator declined by 0.5% in November, and a decline of 0.3% is expected in December.
  5. GDP: Friday, 9:30. This indicator is released monthly and should be treated as a market-mover. The estimate for November stands at 0.1%, which was the gain seen in October.
  6. Manufacturing Production: Friday, 9:30. This key event fell 0.9% in October, its weakest showing since April. The markets are expecting a rebound for November, with an estimate of 0.4%.
  7. Goods Trade Balance: Friday, 9:30. In October, the trade deficit ballooned to GBP 11.9 billion, its highest in four months. The forecast for November stands at GBP 11.4 billion.
  8. Industrial Production: Friday, 9:30. The indicator declined 0.6% in October, its worst showing since April. The markets are counting on a rebound for November, with an estimate of 0.3%.

* All times are GMT

GBP/USD Technical analysis

The pound showed strong volatility last week. On Thursday, GBP/USD tested the 1.25 line, mentioned last week. With the pair almost unchanged over the week, our technical analysis remains intact.

Technical lines from top to bottom:

1.3170 was a swing high in early November.

1.3070 was a high point in mid-November. The symbolic number of 1.3000 is important after providing support to the pair in late September. 1.2910 was a high point in late November. 1.2850 capped recovery attempts in late November.

Further down, 1.2790 served as support late August and also beforehand. 1.2765 was a swing low in mid-November. It is followed by the trough of 1.2725 seen earlier that month.

1.2660 remained busy throughout the week. 1.2590 is next.

Even lower, 1.25 is a round number and also worked as support in early 2017.

1.2420 has held since April 2017.

1.2330 is the final support level for now.

I remain neutral on GBP/USD

With the markets back to a full schedule this week, Brexit will once again be in the headlines. Investors keep an eye on the parliamentary vote on the withdrawal agreement, to be held later in the month. GDP and a key manufacturing report could have a significant impact on the direction of the pound.

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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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