GBP/USD forecast - page 35
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GBP/USD Weekly Forecast December 12-16
Despite several attempts to gain ground in last week’s trading, GBP/USD maintained an overall downside bias and closed out the week at 1.2571, down 1.2% over the prior Friday’s close. As a result of the decline, GBP/USD is heading into this week vulnerable to a drop to the next-lower support at the 1.2500 level. A break back below 1.2500 would be a bearish development for the pair and leave the target at the November 18th 1.2300 low, which represents a test of the upper boundary of the trading range which encompassed price action following the October 7th flash crash in the sterling. And, with oversold conditions not yet a factor, the current bias is to the downside.
Next week’s economic calendar is busy in both the US and the UK. Key events are the Federal Reserve meeting in the US December 13-14 and the Bank of England Policy decision on December 15th.
In the US, a quarter point rate hike is expected and fully priced in. The focus will be on forward guidance from Federal Reserve Chair Janet Yellen. The dollar could be subject to a selloff if Yellen indicates the next rate increase will be delayed by several months. The overall tone of the statement will also be very important with a focus on commentary surrounding inflation and inflation expectations.
In the UK, in addition to the decision on interest rates and quantitative easing, the Monetary Policy Committee will also release the latest policy statement and minutes from the meeting. At the previous meeting, the bank stated that it had a neutral bias and that there was no specific forward guidance with the bank ready to move in either direction depending on economic developments. There have not been any major developments in the economy since the previous meeting. Near-term consumer spending has remained strong, although the industrial data has been disappointing.
Ahead of the policy decision, the economic calendar in the UK is busy, with CPI inflation data on Tuesday, employment data on Wednesday and Retail Sales on Thursday.
In the US, the economic calendar is also full, with Retail Sales and PPI due on Wednesday, while CPI, initial claims and the Philadelphia Fed are on the calendar Thursday, followed by Housing Starts/Building Permits on Friday.
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Pound Surges Against US Dollar but Exchange Rate Unlikely to Break Fresh Ground Ahead of the Fed
The Pound to Dollar exchange rate has shot higher at the start of the new week, however a mix of technical signals and fundamental risks should keep the rate contained within familiar territory
A strong start to the week for Pound Sterling sees it bounce to 1.2688 against the US Dollar.
The US Dollar is struggling against a host of major currencies as markets pare recent gains against the much-anticipated US Federal Reserve meeting due mid-week.
In fact, the USD is the worst-performing G10 currency at the start of the week while the New Zealand Dollar is the best and Pound Sterling the second-best.
No doubt this is profit-taking adjustment by the markets as there is no fundamental reason why the USD should be lower other than traders are expressing caution ahead of the Fed meeting and are nervous of being caught over-exposed.
“The Dollar fell prey to cautious profit-taking,” says Piet Lammens at KBC Markets in Brussels. “Investors apparently are turning a bit more cautious on the Dollar ahead of the Fed policy decision.”
In times such as this technical levels should be respected moreso than would normally be the case.
We are therefore cautious of suggesting the GBP/USD is at the start of a fresh push higher and only once the Fed has passed would we be confident in calling a direction.
Indeed, we must respect the fact that GBP/USD has recently rolled-over from its 1.2730 highs and we suspect the capitulation could lead to further weakness.
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GBP: Staying Short GBP/USD But 'Squirming' Slightly At The Moment
Despite the fact that oil prices are keeping the Rouble twinkling at the top of the overall FX Christmas tree the best G10 currency this week is Sterling.
Relative rates suggest this is a good place to go short vs. the dollar and relative real yields suggest this is a good place to go short against the Euro, but positioning is still problematic.
We’re short GBP/USD and squirming slightly at the moment....
*SocGen maintains a short GBP/USD position targeting a move to 1.2150, with a stop at 1.2890.
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British Pound Strengthens Against Euro & Dollar as House of Lords and Hammond call for Transitional Brexit Period
Pound Sterling trades higher as UK lawmakers push the case for a transitional Brexit period that would allow for continued market access to the EU's single market and ensure much-needed continuity for businesses and investors alike.
GBP trades towards the upper end of its multi-week rebound as the idea of a transitional Brexit deal that will bridge the country’s move out of the European Union gains traction.
Both the House of Lords and a senior Government member made calls for an interim deal that would see the UK remain a member of the single market until such a time as Brexit has been negotiated.
There is a growing consensus that the two years that follow the triggering of Article 50 are simply not long enough to arrive at credible deal.
Chancellor of the Exchequer Stephen Hammond told lawmakers on the Commons' Treasury Select Committee that a transitional deal was needed in order to help smooth the Brexit process in order to avoid disruption that could risk Britain’s “financial stability”.
“There is, I think, an emerging view among businesses, among regulators, among thoughtful politicians, as well as a universal view among civil servants on both sides of the English channel that having a longer period to manage the adjustment between where we are now as full members of the EU and where we get to in the future as a result of negotiations would be generally helpful,” said Hammond.
The Chancellor has made this call before following Theresa May’s comments to the CBI that she would be keen for a deal that avoided a ‘cliff edge’ scenario for businesses.
The British Pound rose on the news with the GBP to EUR exchange rate rising to above 1.19.
The GBP to USD exchange rate trades above 1.26 thanks to a stellar day of gains thanks largely to the US Dollar falling back ahead of a much-anticipated US Federal Reserve meeting mid-week.
The move represents a another move away from a so-called hard-Brexit which remains a key consideration for foreign exchange traders when approaching Sterling.
"GBP is sensitive to the distinction between hard vs soft Brexit which boils down to the degree of single market access, including transitional trade arrangements. This should become clearer through the year, albeit there is little information to handicap the odds of a more or less disruptive economic outcome," says a note on Sterling's outlook for 2017 from JP Morgan.
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