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The British Pound made a huge comeback this week, rising from a very low position back up. GDP, Retail Sales, the MPC’s meeting minutes and 5 other events will set the course of the Pound this week. Here’s a review of the upcoming week for the British Pound, and an updated technical analysis for GBP/USD.

GBP/USD forex chart with support and resistance lines marked on it. Click to enlarge:

GBP/USD Forecast October 2009

The Pound enjoyed reports that spoke about the end of the asset purchasing facility program – no more devaluing the Pound. This was different than the initial Pound-bearish hints. This makes the meeting minutes so important this week. Also the good employment figures helped last week. This week has important releases every day. Let’s review them:

  1. Rightmove HPI: Published on Sunday at 23:00 GMT (midnight UK), this is indeed an early indicator – the first of HPIs. The timing makes this release important, but otherwise, this indicators isn’t very correct. In recent months, this figure wasn’t stable, rising and falling without any trend. Last month rise of 0.6% was preceded by a 2.2% fall before that. It’s expected to rise this time.
  2. Public Sector Net Borrowing: Lending by the government doubled last month, indicating that more money is going to be spent. From 16.2 billion, the expectations for this month are for a small drop to 15.2 billion. Published on Tuesday at 8:30 GMT.
  3. Mervyn King speaks: On Tuesday at 19:15 GMT, about 13 hours before the meeting minutes release, Mervyn King will make a public appearance in Edinburgh, and will speak his mind regarding the Asset Purchasing Facility plan. He’s in favor of expanding it (Pound bearish), but doesn’t have enough support.
  4. MPC Meeting Minutes: Published on Wednesday at 8:30 GMT, this publication is important this time. As aforementioned, King is in favor of expanding the Quantitative Easing plan, while one of his colleagues wants to stop it, when the 175 billion Pounds allocated for it run out. We get to see the internal dispute. This publication will shake the Pound.
  5. CBI Industrial Order Expectations: Published on Wednesday at 10:00 GMT, this release has a bad timing, right after the MPC Meeting Minutes. So, the impact will be weaker than usual. This indicator has been improving in recent months, reaching -45 last time, the best since the beginning of the year, but still negative – showing pessimistic expectations. It’s expected to rise from -48 to -45 this time.
  6. Retail Sales: This important release occurs on Thursday at 8:30 GMT and measures the masses – consumers. Last month, retail sales disappointed when they didn’t rise. Now they’re expected to rise by 0.6%. A resumption of growth here will boost the Pound.
  7. BBA Mortgage Approvals: The week began and is ending with the housing sector. Mortgage approvals have been on the rise, but stalled last month at 38.1K. They’re expected to rise again, this time by 39.7K. The publication, on Friday at 8:30 GMT, is at the same time as GDP, so only a major surprise will have a serious impact.
  8. Prelim GDP: Britain’s ill economy is expected to return to growth in the third quarter, and rise by 0.1%, after a whole year of recession. According to the unofficial NIESR GDP estimate, Britain’s economy didn’t grow also this quarter. The publication, on Friday at 8:30 GMT, is very important for the Pound. A return to growth will be celebrated, while another quarter of contraction will be big trouble.

GBP/USD Technical Analysis

The Pound went down to the support line at 1.5720, mentioned in last week’s GBP/USD Outlook, and then made a huge comeback. Here are the reasons for the Pound’s comeback. It began on Tuesday and continued on Wednesday with a convincing break of the 1.6110 resistance line. After touching 1.64, GBP/USD finally closed at 1.6354.

Looking down, GBP/USD faces 1.6110 as initial support, and 1.5720 as a very strong support line, that proved itself last week.

Looking up, the 1.6660 line is looming above, as it held the Pound down so many times this year. Above that, 1.7042, was the limit in the only occasion that the Pound passed 1.6660. It happened in August.

My sentiment continues to be bearish, despite the amazing comeback. Fundamentals are still weak in Britain. I believe that the hopes of abandoning the QE program won’t be met with the publication of the meeting minutes.

Further reading:

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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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