GBP/USD analysis: speculative interest forgetting Brexit temporarily
GBP/USD Current price: 1.2837
- Brexit uncertainty remains high, BOE sees GDP losing 25% on a no-deal divorce.
- Fed's Powell triggered a dollar sell-off that sent the pair above 1.2800.
The Pound Sterling remained subdued amid Brexit uncertainty, spending most of the day around 1.2750 against the greenback, its latest comfort zone. The GBP/USD pair jumped to 1.2805 mid-European session following headlines indicating that the UK FinMin Hammond said that if the Parliament blocks May's plan, a Norway-style deal will be considered. The movement seemed quite unjustified, rather reflecting market's hopes for a solution than an actual end to the Brexit drama, as he also said that a no-deal Brexit could still happen and could mean the economy will be 7.7% smaller in 15 year time than if the UK stays in the EU. PM May's spokesman responded by saying that the economy would continue to grow in all Brexit scenarios, as all of them are being prepared by the UK government. Also, the BOE published its report on Brexit, saying that in the worst case scenario, Brexit will lead to 8% fall in GDP short-term while the Pound could depreciate as much as 25%. Governor Carney said that "the UK is not fully ready for a cliff edge Brexit," and would need a transition period as long as possible to adjust.
The market forgot about Brexit for once after US Federal Reserve head, Powell, hinted policymakers could pause their rate hike cycle amid increasing risk of slower growth ahead. The GBP/USD pair soared to the current 1.2830 price zone on dollar's sell-off, although the risk of further declines on more Brexit woes is not out of the table. The 4 hours chart shows that the pair advanced above its 20 SMA but also that the 200 EMA heads south above the current level, while the Momentum indicator barely advances below its 100 level. The RSI indicator, on the contrary, heads north around 58, suggesting the current rally may continue during the upcoming sessions, or at least until the next Brexit negative headline gives speculative interest a reality check.
Support levels: 1.2810 1.2770 1.2735
Resistance levels: 1.2865 1.2900 1.2940
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
