Browsing: GBP USD Forecast

GBP/USD showed considerable volatility throughout the week, but ended the week unchanged. The upcoming week has just one event. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

British inflation levels moved higher in July. Consumer inflation climbed to 1.0%, up from 0.6% beforehand. The core reading also pointed higher, rising from 1.4% to 1.8%. Both releases beat expectations. Retail sales posted a third straight gain, with a reading of 3.6%. This beat the estimate of 2.0%. The Services PMI showed a strong increase in business activity in July. as the index rose to 60.1, up from 56.5 in June. On the manufacturing front, the Manufacturing PMI improved to 55.3, up from 54.0 beforehand. The 50-level separates contraction from expansion.

In the US, the Philly Fed Manufacturing index slowed to 17.2, down from 24.1 beforehand. Unemployment claims surprised by climbing to 1.1 million, above the estimate of 930 thousand. The Federal Reserve minutes were dovish. Members stated concern about the continuing adverse impact of Corvid-19 on the US economy. The minutes also reiterated a call from Fed Chair Jerome Powell on the need for a fiscal package from Congress to boost the struggling economy. The week ended with good news from the manufacturing sector, as Manufacturing PMI improved to 53.6, its highest level since February 2019.

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

  1. CBI Realized Sales: Tuesday, 10:00. The Confederation of British Industry’s gauge of sales climbed sharply in July to 4 points, up from -37 beforehand. This was the first positive reading, which indicates a higher sales volume, since February.  The uptrend is expected to continue, with an estimate of 8.

Technical lines from top to bottom:

1.3513 is the 52-week high for the pair.

1.3312 has held in resistance since December 2019.

1.3207 is next.

1.3113 is a weak resistance line.

1.3009 is the first support line.

1.2891 is next.

This line is followed by 1.2838.

1.2718 (mentioned last week) has provided support since late July. It is the final support line for now.

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I remain neutral on GBP/USD

The pound has been showing volatility, but without a clear direction. With no major British events this week, it could be another quiet week for GBP/USD.

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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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