Browsing: GBP USD Forecast

GBP/USD enjoyed an excellent week, posting gains of 1.5 percent. This marked the highest 1-week gain since May. This week features GDP and Manufacturing Production. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.

British PMIs pointed to a decline in economic activity. The services, manufacturing and construction PMIs all remained below the 50-level, which separates contraction from expansion. Still, the pound posted sharp gains, as investors were pleased that the Conservatives held onto their 10-point lead in the polls.

In the U.S., last week’s highlights were key employment reports. Nonfarm payrolls soared to 266 thousand, up from 128 thousand a month earlier. Wage growth remained steady at 0.2%, just shy of the forecast of 0.3%. As well, the unemployment rate dropped from 3.6% to 3.5%. This beat the forecast of 3.6%. On the consumer front, UoM Consumer Sentiment climbed to 99.2, up sharply from 95.7 a month earlier.

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

  1. GDP: Tuesday, 9:30. This monthly release helps analysts track GDP on a monthly basis. The September reading showed that the economy contracted by 0.1%, identical to the August figure. Analysts are expecting a small gain of 0.1% in October.
  2. Manufacturing Production: Tuesday, 9:30. The manufacturing sector continues to sputter, as the indicator has recorded declines in three of the past four readings. The estimate for October stands at 0.1%.
  3. RICS House Price Balance: Thursday, 0:01. The housing market remains weak, as slightly more surveyors reported a price decrease than those that reported an increase in prices. This trend is expected to continue in the upcoming release.
  4. Parliamentary Elections: All Day. Brits go to the polls in a snap general election, and the results will likely determine the fate of Brexit. The Conservatives continue to hold onto a 10-point lead, and Prime Minister Johnson is expected to make a quick exit from the European Union if he wins a majority.
  5. Consumer Inflation Expectations: Friday, 9:30. Inflation expectations often lead to actual inflation figures, so this indicator is closely monitored. The indicator climbed to 3.3% in October, up from 3.1% a month before. Will the uptrend continue in November?
  6. CB Leading Index: Friday,14:30. This Conference Board index, which is made up of 7 economic indicators, declined by 0.4% in September. We now await the November data.

GBP/USD Technical analysis

Technical lines from top to bottom:

We start at the round number of 1.3500.

1.3375 has held in resistance since early March. 1.3217 is next.

Close by, there is resistance at 1.3170. This line has weakened with GBP/USD posting strong gains last week.

1.3070 is providing support. It was a high point in November 2018.

The round number of 1.3000 (mentioned last week) was breached last week, for the first time since mid-October.

1.2910 is protecting support at 1.2910. It is followed by 1.2850.

1.2728 has held in support since mid-October. It is the final line for now.

I am neutral on GBP/USD

This week’s mega-event is the British election on December 12, and the pound could show strong volatility after the results are in. Investors are optimistic that the Conservatives will form the next government, and an outright majority for the Conservatives could see the pound record strong gains. However, nothing is certain when it comes to elections, and a Labour upset would likely send GBP/USD to lower ground.

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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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