Browsing: GBP USD Forecast

Mervyn King sure got a weaker Pound this week – it collapsed across the board. The upcoming week consists of 8 events that will move the Pound. Here’s an outlook for these events and updated technical analysis for GBP/USD in its lower ground.

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

GBP/USD forecast

The rate decision that we saw this week wasn’t different than previous ones, but the chance of renewing the Quantitative Easing program (hurting the Pound) still exists. Let’s start:

  1. Kate Barker talks: Starts speaking on Monday at 13:00 GMT. Barker is about to finish her job as a voting member of the MPC in May. This might make her words, in a speech in London, more loose. The last rate decision didn’t contain any big surprises, but she might indicate something about the future.
  2. BRC Retail Sales Monitor: Published on Tuesday at midnight GMT. The British Retail Consortium releases this unofficial retail sales release before the government, but it isn’t always accurate.  After four months of expansion, sales volume fell by 0.7% in the previous month. A small rise is expected this time.
  3. RICS House Price Balance: Published on Tuesday at midnight GMT and overshadowed by the BRC release. The balance between areas reporting house price rises and ones showing a drop has been OK. After this indicator reached a peak at 45%, it fell back to 30%. It’s now expected to rise again – from 32% to 36%.
  4. Trade Balance: Published on Tuesday at 9:30 GMT. The British deficit rose to 7.3 billion last month, and it’s now expected to drop back to to 6.9. A deficit in trade balance is normal for Britain.
  5. Manufacturing Production: Published on Wednesday at 9:30 GMT. This event will probably have the strongest immediate impact on the Pound. Production surprised with a nice rise of 0.9% last month, and is now predicted to get back to slower growth – 0.3%. Note that the Industrial Production figure contains manufacturing (80%) and other sectors, but the manufacturing number is eyed.
  6. NIESR GDP Estimate: Published on Wednesday at 15:00 GMT. The NIESR independent institute is known for its accuracy. They release a monthly estimate that relates to the three months that just ended. Their last projection showed growth at a scale of 0.4%. A similar number is expected this time.
  7. Consumer Inflation Expectations: Published on Thursday at 9:30 GMT. The BOE releases a quarterly figure that shows what consumers expect. Prices have risen in the UK, but Mervyn King has a tendency to dismiss it. Well, now we’ll see what consumers think. In the previous three quarters, expectations were identical – 2.4%.
  8. Spencer Dale talks: Starts speaking on Friday at 10:00 GMT. As chief economist of the BOE, Dale’s words have an impact on the Pound. He’ll talk in front of Cambridge students close to the close of the markets and could shake the Pound.

GBP/USD Technical Analysis

The Pound began the week with a big collapse: it lost 1.50 and dropped quickly to 1.4780, were it bounced back. The close at 1.5133 isn’t too bad considering the bad start, but it still reflects a third week of lower closes.

GBP/USD is currently bound by two minor lines: 1.50 from below, being a round number, and this week’s peak of 1.5167 – a line that didn’t appear in last week’s outlook.

Looking up, 1.5350 is a very strong resistance line. The break of this line (when it served as support) sent GBP/USD tumbling down. Higher, 1.5833 is the next important line. GBP/USD wasn’t above it for many weeks now.

Looking down, 1.4780 provides strong support. It worked as a support and resistance line in the spring of 2009, and held the Pound from falling further just now.

Even lower, 1.44 is the next significant line of support, working as such during May 2009. A break of 1.4780 is needed for further downside towards this line.

I remain bearish on GBP/USD.

Worries about a political stalemate, debt and unemployment continue to weigh on the Pound. The loss of important technical levels reflects the situation.

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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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