GBP/USD forecast: No-deal Brexit fears continue to weigh ahead of Tory leadership contest results

Persistent Brexit-related uncertainties continue to dent sentiment surrounding the GBP.
Tempered Fed rate cut expectations underpinned the USD and added to the selling bias.
Tuesday’s focus will be on the UK political developments/Tory leadership voting results.

Haresh Menghani FXStreet

After an initial uptick to a daily high level of 1.2517, the GBP/USD pair met with some fresh supply in reaction to the UK Foreign Office Minister - Sir Alan Duncan's resignation on Monday. This comes on the back of reports, indicating that the UK Finance Minister - Philip Hammond, stands ready to resign if Boris Johnson becomes the next British PM added to the pessimism and kept exerting some downward pressure. The already weaker sentiment surrounding the British Pound deteriorated further after NIESR think tank assigned 40% chance of no-deal Brexit and said there are around 25% chances that the country is already in a “technical recession”.

The pair dropped to an intraday low level of 1.2456 but managed to recover around 20-pips amid a subdued US Dollar price action, weighed down by the US President Donald Trump's continuous pressure for immediate rate cuts. However, the fact that investors have been scaling back expectations for an aggressive monetary easing by the Fed helped limit any meaningful USD downtick and prompted some fresh selling around the major during the Asian session on Tuesday.

Given that Boris Johnson is more likely to win the Conservative leadership race and get the job of UK PM, rising odds of a no-deal Brexit should hold the GBP bulls on the back-foot. Apart from the UK political/Brexit-related headlines, positive developments surrounding the US-China trade deal added to the USD strength and pave the way for the resumption of the pair's well-established bearish trend.

From a technical perspective, the pair’s inability to capitalize on the recent corrective bounce from 27-month lows and subsequent weakness for the third consecutive session might have already set the stage for a move back towards challenging the 1.2400 round figure mark. The bearish momentum could further get extended, though is likely to find decent support near the lower end of a near five-month-old descending trend-channel – currently near the 1.2340 region.

On the flip side, immediate resistance is now pegged near the 1.2475-80 region and is closely followed by the 1.2500 psychological mark, which if cleared decisively might prompt some near-term short-covering bounce and lift the pair back towards the 1.2550-60 supply zone. A follow-through buying might negate the near-term bearish outlook and lift the pair further beyond the 1.2600 handle towards testing its next major hurdle near the 1.2655-60 area.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD consolidates gains, holds above 1.3600

GBP/USD stays in a consolidation phase above 1.3600 on Monday following the previous week's impressive rally. The US Dollar recovers ground due to uncertainty over the potential impact of US economic sanctions' against Iran on energy prices, leaving the risk-sensitive pair on the backfoot.

EUR/USD stays below 1.1700 as markets turn cautious

EUR/USD stays on the back foot and trades below 1.1700 after posting strong gains in the previous week. The pair struggles as the US Dollar attempts a tepid recovery following last week's sell-off that was triggered by the US Treasury's change to bond buyback plan. Meanwhile, investors cling to a cautious stance, awaiting this week's key events and details surrounding the US' economic sanctions package against Iran.

Gold extends rally to fresh three-month high above $4,650

Gold (XAU/USD) extends its advance on Monday, building on the strong rally seen last week following the US Treasury’s buyback announcement and trading at its highest level since May near $4,650.

Here's what I learned trading meme coins

I’ve been trading cryptocurrencies for the past seven years, with meme coins becoming one of the most exciting and implacable parts of my experience. I love them because they represent internet culture and community sentiment, and, let’s be honest, extreme speculation. Newly launched meme coins were especially tempting: get in early enough, I thought, and a small bet could turn into a huge return.

Bessent’s presser in focus

Preview: Busy week ahead, with Bessent kicking this off today, with things wrapping up with Warsh at Jackson Hole. For a month that should have been a temporary period of ‘quiet’, we had anything but last week, with the bond market and tariffs front and centre.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.