- Sterling on notably weaker footing heading into the end of the week, with Brexit concerns and a cloudy rate hike next week on the docket.
- US GDP figures will be setting the direction of this week’s final trading hours.
The GBP/USD is trading into 1.3100 ahead of Friday’s London market session after Brexit concerns and a turnaround in the US Dollar took the major pair down from the 1.3200 key level in Thursday’s action.
The EU’s chief Brexit negotiator Michael Barnier soundly rejected the latest Brexit proposal from the UK, and Prime Minister Theresa May is back to the drawing board with her hard0line Brexiteers close at her heels, and the next round of negotiations is slated for mid-August, though this time around PM May will be heading up talks personally, and Sterling traders will be hoping for some much-needed clarity and positive results after months of little to no action on averting a hard-Brexit scenario.
Next week will be seeing a rate call from the Bank of England (BoE), and markets are anticipating a 25 bps hike from the UK’s central bank, though a rate hike is no longer a shoe-in after a raft of disappointing data for the UK’s economy last week, and the GBP/USD must first survive a showing for the US’ preliminary GDP today at 12:30 GMT, and Q2’s annualized GDP is expected to clock in at an eye-watering 4.1%, a significant jump over the previous reading of 2.0%, which was not a slouch of a reporting in its own right.
GBP/USD Levels to watch
Short sellers have their eyes set on the 1.30 major handle looking forward, and according to FXStreet’s own Haresh Menghani: “from a technical perspective, weakness below the 1.3100 handle could get extended towards weekly lows support near the 1.3070 region. A follow-through weakness might prompt some additional technical selling and turn the pair vulnerable to accelerate the fall further towards challenging the key 1.3000 psychological mark.
On the flip side, any meaningful up-move now seems to confront fresh supply near the 1.3140-45 zone, above which the pair is likely to make a fresh attempt towards conquering the 1.3200 handle. Any subsequent up-move might continue to be capped at a short-term descending trend-channel resistance, currently near the 1.3225-30 region, as investors might now start positioning for the much anticipated BoE monetary policy decision next week.”
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