Browsing: GBP USD Forecast

The dollar’s collapse reached the Pound very late in the week, sending it unconvincingly above the huge technical barrier of 1.6660. This week features inflation and employment figures as well as retail sales and many other indicators that will shape the direction of Pound. Here’s an outlook for the busy week in Britain, and an updated technical analysis.

GBP/USD forex chart with support and resistance lines:

GBP/USD Breakout?

Last week’s rate statement didn’t include an expansion of the Quantitative Easing program, and this helped the Pound push forward, after it stayed behind. This week has more indicators, and they’re scattered nicely along the week:

  1. RICS House Price Balance: This release was delayed from last week, and is due on Monday at 23:00 GMT. RICS publishes the percentage of property surveyors reporting a price movement. This indicator hasn’t been positive in over two years. In the past 5 months, this figure was better than early expectations, reaching -8.1% last time. An almost insignificant drop of 0.1% is expected this time. If it turns positive, it’ll be a boost for the British Pound.
  2. CPI: British prices haven’t suffered like European ones, but are still slowing. After last month’s surprising rise of 1.8% (annually adjusted), the upcoming release is expected to stand only on 1.4%. Core CPI is also expected to slow from 1.8% to 1.6%. Published on Tuesday at 8:30 GMT.
  3. RPI: Together with the CPI, RPI is released. The Retail Price Index is of interest as well, and a surprise here can overshadow the CPI. RPI fell for five consecutive months, and this is somewhat alarming for British policymakers. It’s expected to continue the negative trend, and fall by 1.5%.
  4. Inflation Report Hearings: Just 15 minutes after the CPI and RPI releases, on Tuesday at 8:45 GMT,  Mervyn King and some of his associates in the BoE will begin testifying in front of the British parliament. The long session usually includes comments about the currency markets, something that can sure shake the Pound.
  5. Claimant Count Change: The most important British employment figure is due on Wednesday at 8:30 GMT. The number of jobless claims in the UK is on the rise for almost a year and a half. In the last two months, the number has been around 24K. This time it’s predicted to rise by about the same number, 24.6K. This early jobless indicator is very important for GBP/USD.
  6. Unemployment Rate: Contrary to the Claimant Count Change, this figure is lagging by a month. Despite the late release, this figure is quoted by the media, and has serious impact on policymakers. British Unemployment Rate has been on the rise, and is expected to continue rising, up to 8% from last month’s 7.8%.
  7. Average Earnings Index: Published with the previous tow employment figures, this figure shows the inflation implications of the employment figures. After rising by 2.5% last time, it’s expected to rise by 2.1% this time.
  8. Retail Sales: Another major release is expected on Thursday at 8:30 GMT. Like in any other country, this figure is very important. In the past two months, British retail sales have risen beyond expectations. After a 0.4% rise last month, a rise of 0.3% is predicted this time.
  9. Consumer Inflation Expectations: Published with the Retail Sales, this survey of British consumers checks out their inflation expectations for the next year. This number has been floating between 2% to 3% in recent months, and isn’t expected to change dramatically this time.
  10. CBI Industrial Order Expectations: The confederation of British Industry surveys about 550 manufacturers and checks their future expectations. A negative figure, meaning expectations for a declining volume of orders, has been seen in over a year. Contrary to many other British figures, this number hasn’t shown improvement, and fell short of expectations in the last 8 months. After hitting -54 it’s expected to rise to -49 this time. Published on Thursday at 10:00 GMT.
  11. Public Sector Net Borrowing: The last British indicator is due on Friday at 8:30 GMT. This number reflects the amount of money that the government borrows from the public. 6 months of budget deficit will probably continue, with net borrowing expected to rise from 8 to 17.9 billion.

Retail Sales and CPI are also published in the US this week, and will impact GBP/USD, but this crowded week of British indicators keeps the limelight on the UK.

GBP/USD Technical Analysis

Was there a breakout or not? This is the big question. After I wrote that the Pound is still behind, even after the second wave of dollar weakness, it did rise above the strong resistance line of 1.6660 on Thursday and even reached a nice high level of 1.6741 on Friday. But a convincing close, like the EUR/USD wasn’t achieved.

GBP/USD closed at 1.6663, at the line. The breakout of AUD/USD last Friday was small, yet reliable. AUD/USD continued the trend on Monday. But when we look at the Pound, it’s a different story. It isn’t that strong…

I remain unconvinced that this was a real break, and I believe that 1.6660 will continue to cap GBP/USD. If I’m correct, the next major support line is only at 1.60.

But I may well be wrong, and the dollar’s fall may sweep the Pound as well. Looking up, 1.7040, the peak of August’s rise is the next resistance line, and 1.74 is far out.

The direction of the Pound remains a riddle to me. Mohammed Isah supplies an interesting technical analysis for the Pound.

Further reading:

Get the 5 most predictable currency pairs

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:

1 58 59 60 61