GBP/USD Forecast: More falls possible as hard Brexit reality bites

  • GBP/USD has been losing ground as optimism about a Brexit deal fades.
  • The US-Sino trade war and the UK's exit from the EU are set to dominate trading today.
  • Monday's four-hour chart is pointing to limited gains.

"I still hope prime minister Boris Johnson will not like to go down in history as Mr. No Deal," – said Donald Tusk, President of the European Council. The Polish statesman added that there would be no "mini-deals" following a hard Brexit.

His words, early on Saturday, contradicted the positive response that the British leader received from German Chancellor Angela Merkel and French President Emmanuel Macron last week. Both showed a willingness to listen to new proposals regarding the Irish backstop – but said the onus was on the UK. Johnson hit back by saying that Britain wants a deal and blamed the EU for potentially leading to a hard exit. 

Apart from that clash, Johnson also hinted that Britain would withhold the £39 billion it agreed to pay the EU upon leaving the bloc – the "divorce bill." European MP and Brexit Coordinator Guy Verhofsdat responded that paying the bill would be the first condition to talk after a no-deal Brexit.

To top it off, the Observer reported that Downing Street has asked for legal advice about closing parliament for five weeks in order to ram through a hard Brexit. 

British traders are enjoying a bank holiday, but the pound is already moving – falling from the highs it reached on Friday. Just before the weekend, the US-Sino trade war intensified. China announced new tariffs in response to those planned by the US in September and in December. President Donald Trump responded by announcing higher duties from October. Moreover, the president called American companies to leave China.

The escalation sent bond yields lower – raising the odds for the Federal Reserve to cut rates next month. And indeed, Fed Chair Jerome Powell opened the door to reducing rates once again. He noted the "eventful three weeks" since the bank cut rates in July – the first such move in over a decade. 

Falling bond yields weighed on the US dollar, allowing GBP/USD to gain. That combination of Brexit optimism and a weaker dollar has been fading amid recent Brexit developments and fresh hopes that Washington and Beijing can still find a path to de-escalate tensions. Trump has said that both sides have been talking. Also, it is essential to note that the new round of levies is due for September 1st – leaving time for another trade truce. 

Fresh figures from the US economy are due later in the day. Durable Goods Orders have likely moderated in July. 

See US Durable Goods Orders Preview: Business and consumer spending diverge

Overall, Brexit and trade will likely set the tone, with US figures only temporarily diverting attention. 

GBP/USD Technical Analysis

GBP USD Technical analysis August 26 2019

GBP/USD continues trading above the uptrend channel it broke above last week. Moreover, the currency pair continues enjoying upside momentum on the four-hour chart and trades above the 50 and 100 Simple Moving Averages. It has failed to top the 200 SMA for now. All in all, the technical picture is positive.

Resistance awaits at 1.2294, which is the peak seen on Friday. Next, we find 1.2380 that provided support in mid-July, followed by 1.2420 that held GBP/USD up later that month. 

Support awaits at 1.2200 that worked as support on Friday, followed by 1.2120, which was a support line late last week. Next, we find 1.2065 and 1.2015.

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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD holding onto range amid trade tensions, ahead of FOMC minutes

EUR/USD is trading above 1.1050, within familiar ranges. The US Senate's support of Hong Kong protesters has aggravated tensions with China. The Federal Reserve's meeting minutes are eyed.


GBP/USD is on the back foot after the Johnson-Corbyn debate

GBP/USD is trading closer to 1.29, after Labour leader Corbyn beat expectations in his debate with PM Johnson. Further opinion polls are awaited. 


USD/JPY reverses an early dip to near 1-week lows, focus shifts to FOMC minutes

Reviving safe-haven demand benefitted the JPY and exerted some follow-through pressure. A modest USD rebound helped bounce off lows ahead of the latest FOMC meeting minutes. A sustained move beyond 109.00 handle (200-DMA) needed to confirm near-term bullish bias. 


US Dollar Index extends gains to the 97.90 region, focus on Fed, trade

The greenback, when tracked by the US Dollar Index (DXY), is adding to Tuesday’s gains in the 97.90 region. US 10-year yields drop to 2-week lows around 1.75%. FOMC minutes will be the salient event later today.

US Dollar Index News

Gold climbs to near 2-week tops, beyond $1475 supply zone

Gold edged higher through the early European session on Wednesday and climbed to near two-week tops, just above the $1475 region in the last hour.

Gold News

Forex Majors