GBP/USD Forecast: Green light for gains as pound ignores Yellowhammer warnings


  • GBP/USD has been rising in an uptrend channel and may extend its gains.
  • Sterling has been ignoring the warnings of chaos under a no-deal Brexit.
  • Further political developments and US inflation figures will likely shape trading today.

Is GBP/USD already pricing in the worst-case scenario? Probably not, but it seems that investors are optimistic that a hard Brexit will be avoided. A currency pair that weathers bad news is showing its strength and may shoot higher on an upbeat development. 

The UK may suffer disruption to medicine supplies, rising food prices, and perhaps public disorder on its streets in case of a no-deal Brexit. Prime minister Boris Johnson's government made that assessment in August and then labeled the scenario as a "base-case" one. Back then, the government dismissed the projections – called "Yellowhammer" and revealed by the Sunday Times – as outdated.

And now, after it was asked to publish them, it changed the headline to "reasonable worst-case scenarios." Michael Gove, the minister responsible for Brexit preparations, has played down the details and said that he had taken several steps to prepare the UK for leaving the EU.

Wednesday's late-night publication failed to push the pound lower – perhaps as it was already published – but also after parliament's bill to prevent a hard-exit became law on Monday. Moreover, the House of Commons – where an anti-no-deal coalition commands control – may return to session sooner rather than later.

The High Court in Scotland ruled that the decision to suspend parliament was "unlawful." As a court in London ruled in favor of the government, there has been no return to normal business in the Hosue. This matter of prorogation will be finally decided next week by the UK Supreme Court. 

With 49 left to go until October 31 – the current Brexit day – uncertainty remains high despite the recent optimism. Further comments by politicians may move the pound. While opposition parties have succeeded in raising the chances of another extension, they lack a plan of what to do instead – some want to revoke Brexit, others want a second referendum, while several wish to leave with a deal. 

The focus soon shifts to the US. The Consumer Price Index (CPI) figures are set to move markets less than a week ahead of the all-important decision by the Federal Reserve. Subdued inflation data has been one of the reasons for the Fed's rate cut, and an increase in prices may limit future cuts. 

See:

GBP/USD Technical Analysis

GBP USD technical analysis September 12 2019

GBP/USD is trading within an uptrend channel. Uptrend resistance was formed in mid-August while support dates back to last week. The currency pair is trading above the 50, 100, and 200 Simple Moving Averages adding to the bullish sentiment. Moreover, Momentum on the four-hour chart is positive.

All in all, bulls are in control.

Some resistance awaits at 1.2355 which capped GBP/USD last week. September's high point at 1.2385 is the next level to watch. Further up, 1.2420 held the pair up in July and now serves as resistance. 

Support awaits at 1.2310, which provided support earlier this week and also capped cable in late August. Lower, we find 1.2235, which was a swing low last week. Next, 1.2115 was a support line in late August,

 

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays weak near 1.0650 ahead of Eurozone PMI data

EUR/USD stays weak near 1.0650 ahead of Eurozone PMI data

EUR/USD remains on the back foot near 1.0650 in European trading on Tuesday. Resurgent US Dollar demand amid a cautious risk tone weighs on the pair. Investors stay wary ahead of the preliminary Eurozone and US business PMI data. 

EUR/USD News

GBP/USD eases below 1.2350, UK PMIs eyed

GBP/USD eases below 1.2350, UK PMIs eyed

GBP/USD is dropping below 1.2350 in the European session, as the US Dollar sees fresh buying interest on tepid risk sentiment. The further downside in the pair could remain capped, as traders await the UK PMI reports for fresh trading impetus. 

GBP/USD News

Gold price flirts with $2,300 amid receding safe-haven demand, reduced Fed rate cut bets

Gold price flirts with $2,300 amid receding safe-haven demand, reduced Fed rate cut bets

Gold price (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark heading into the European session.

Gold News

PENDLE price soars 10% after Arthur Hayes’ optimism on Pendle derivative exchange

PENDLE price soars 10% after Arthur Hayes’ optimism on Pendle derivative exchange

Pendle is among the top performers in the cryptocurrency market today, posting double-digit gains. Its peers in the altcoin space are not as forthcoming even as the market enjoys bullish sentiment inspired by Bitcoin price.

Read more

Focus on April PMIs today

Focus on April PMIs today

In the euro area, focus today will be on the euro area PMIs for April. The previous months' PMIs have shown a return of the two-speed economy with the service sector in expansionary territory and manufacturing sector stuck in contraction. 

Read more

Majors

Cryptocurrencies

Signatures