GBP/USD Forecast: Turkish Lira related crisis keep Sterling under pressure with fundamentals seen supportive
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- The US Dollar is stronger against the European majors including Sterling as Turkish Lira related currency crisis keeps safe havens like the US Dollar or Japanese Yen well supported.
- The GBP/USD is likely to be given a helping hand from the development of the UK economic fundamentals while Brexit uncertainties are still present.
- The GBP/USD is trading at the lower boundary of the downwards sloping trend with corrective shootout higher likely scenario.
The GBP/USD is trading down about 0.15% at around 1.2740 against the US Dollar on Monday as the Turkish Lira related crisis roils the market sentiment with stock markets falling and emerging markets suffering while traditional safe haven asset like US Dollar and Japanese Yen are well supported.
Turkish Lira crises emerged on Friday and continued during the first trading day of the thirds week of August after the Turkish central bank refused to hike the interest rates in an effort to stabilize its free-falling currency. Instead, Turkish central bank opted to introduce lower minimum reserve requirement ratio, seen by markets as not enough, while in canceled last minute the TRY providing liquidity operation keeping the pressure on its own currency.
The emerging market's selloff and safe haven’s strengthening prove the Risk-off market sentiment that is likely to dominate the market short-term, bur eventually reversing to normal market conditions.
While Sterling is kept lower by factors outside the UK, domestic economic conditions are expected to remain on the positive side. The UK labor market report for July is expected to see wages rising at the unchanged growth rate from June while the unemployment rate is seen dwelling at a 4-decade low of 4.2%, the Office for National Statistics is expected to report on Tuesday at 8:30 GMT.
Technically, the GBP/USD is trading at the lower boundary of the downward sloping trend channel with technical oscillators like the Relative Strength Index and Slow Stochastics exhausted in the oversold territory. Momentum is sloping downwards slightly in negative territory, but the move looks exhausted. Although GBP/USD might test 1.2700 round big figure on the downside, exhaustion of technical oscillators and strong UK fundamentals favor retracement higher towards 1.2800-1.2850-1.2900 region.
GBP/USD 4-hour chart
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