GBP/USD: Make or break time at 1.28 the figure; if bullish Brexit, Sterling is cheap
|- GBP/USD has been sliding as markets fade rallies in broader bearish trend, ripe for a break of the 1.28 handle.
- GBP/USD looking cheap if your bullish Brexit deal.
- UK Chancellor of the Exchequer Phillip Hammond delivers the UK budget and sees 2019 GDP growth 1.6% vs 1.3% prior.
The pound has been offered since breaching 1.2850 in late London and at the start of the North America trade as the dollar and risk appetite firms up. The dollar has been finding a bid again with US stock markets battling back lost ground on Monday, following suit of a bounce in European bourses.
Europe's recovery was sparked by some easing concerns over the impact of the Italian budget crisis amid falling Italian T-bond yields and a narrowing spread with German government bond yields. The DJIA is +0.38%, NASDAQ flat and S&P 500 0.62% in the green at the time of writing.
Brexit saga continues, very much up in the air
Meanwhile, the pound is taking its cues from politics in the UK whereby the stakes are rising for a no deal Brexit and there are even calls that should there be a no deal second referendum, this could result in the UK remaining in the EU after March 29th. The feeling is that a so-called People's Vote at the end of the Brexit negotiations is becoming more and more likely and there could be a push for an extension of Article 50 resulting in the UK fully remaining in the EU after March 29. UK Chancellor of the Exchequer Phillip Hammond is delivering the budget and sees 2019 GDP growth 1.6% vs 1.3% prior. He has been trying to not be too gloomy about Brexit. However, he has thrown the idea of a spring statement becoming a “full fiscal event” if needed - in other words, which could be an emergency budget if there is no deal.
GBP/USD is cheap if Bexit is going to be alright on the night
Viraj Patel, Foreign Exchange Strategist at ING Bank suggested that GBP's state of flummox presents an opportunity:
"GBP remains in its usual state of flummox as the Brexit impasse continues, with politics at home the biggest stumbling block. Until this is resolved, we expect GBP/USD to trade below 1.30. GBP/USD trading 2 big figures below the ‘neutral’ sentiment level of 1.30 presents a good opportunity to buy GBP again – if one believes that Brexit will, in fact, be alright on the night. We see GBP/USD’s short-term gravitational pull at 1.35-1.36 on a Brexit deal being reached this side of Xmas."
GBP/USD levels
Analysts at Commerzbank remain bullish despite the recent sell-off to below the 1.28 handle. "This is seen as the last defence for the 1.2662 August low. Currently we would allow for a very small bounce towards 1.2950/70 ahead of further weakness." However, the analysts have noted that below 1.2662 would trigger further weakness to the 61.8% retracement of the move 2016-2018 and June 2017 low at 1.2593/89.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.