GBP/USD Forecast: UK inflation miss and officials getting ready for no-deal at the Brexit summit weigh
|- The GBP/USD slipped lower on Wednesday ahead of the European Council meeting on Brexit.
- The UK headline inflation decelerated more than forecast in September.
- Irish Foreign Minister Coveney said that “people should not panic if no deal this week” readying markets for the Brexit summit outcome.
The GBP/USD is trading on the downside at around 1.3140 after the UK inflation data failed to meet the market expectations with headline inflation decelerating to 2.8% y/y in September while core inflation decelerated to 1.9% y/y. The market focus turns to Brexit summit scheduled for the Wednesday evening as the leaders of the European Union will dine with the UK Prime Minister Theresa May over the outcome of ongoing intensive negotiations.
Judging from the public statements of various European Union officials, it is clear that the Brexit summit today will not deliver the final agreement. The Irish Foreign Minister Simon Coveney said that “people should not panic if no deal this week” getting the markets for the Brexit summit outcome.
In the run-up to the Brexit summit, the European Council President Donald Tusk said that no deal is more likely than ever before.
Although Sterling has been resilient so far to the Brexit summit gossip so far, the actual no deal outcome is set to trigger a pullback on GBP/USD.
Technically, the GBP/USD closed to gap on the downside after opening at 1.3085 on Monday abut broke away from parallel upward sloping trendline on a build-up of the Brexit summit related uncertainty and the UK inflation data miss.
The technical oscillators are pointing downwards on the 1-hour chart and further potential lays on the downside. The GBP/USD needs to break the confluence resistance of 1.3103 representing a 100-day moving average and the 38.2% Fibonacci retracement of a move from 1.4377 to 1.2662 to move lower targeting 1.3030 and 1.2970 further down. On the upside the GBP/USD the immediate target is 1.3230-1.3250 last week’s high.
GBP/USD 1-hour chart
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