- GBP/USD has been holding up as UK PM Johnson is trying to address concerns about Brexit legislation.
- The Federal Reserve's decision and retail sales are set to rock markets.
- Wednesday's four-hour chart is showing that momentum turned positive, yet strong resistance looms.
A Brexit compromise is always good news for the pound – which has been extending its recovery. Prime Minister Boris Johnson has been seeking to soothe concerns about the controversial Internal Markets bill that passed the first hurdle in parliament.
The legislation violates the Brexit deal that Johnson signed with the EU – as admitted by government ministers. Sterling suffered badly when the move was announced and as Brussels laid down an ultimatum to London – rescind the bill by the end of the month or face sanctions.
Several members of the PM's ruling Conservative Party have either abstained or voted down the legislation – and others were expected to follow. If the final wording refrains from breaking international law, the pound could extend its gains.
GBP/USD could continue higher if US Retail Sales fail to meet high expectations. Despite the expiry of several government programs, economists expect another increase in expenditure in August. The high bar opens the door to disappointment and could send the greenback down.
See US Retail Sales August Preview: Surprising facts on retail sales
However, the most important event of the week is due out late in the day – the Federal Reserve's last decision before the elections. The focus is on the Fed's new forecasts, especially for employment and growth.
While upgrades are on the cards, the bank may still project only a gradual return to pre-pandemic levels. However, if Federal Reserve Chairman Jerome Powell refrains from signaling new stimulus, stocks may turn down.
The mood in equity markets has already cooled – especially as tech stocks are off their highs. A report that the Federal Trade Commission opened an antitrust probe into Facebook's dealings is also weighing on the sector. In case the Fed fails to inspire, stocks may drop and the safe-haven dollar may rise.
See:
- September FOMC Preview: Projections, projections, projections
- How the Fed could drown markets while trying not to rock the boat
Overall, optimism about Brexit and weak US retail sales may boost GBP/USD while the Fed may bring it down.
GBP/USD Technical Analysis
Pound/dollar's recent stability helped turn momentum on the four-hour chart to positive. The Relative Strength Index is stable while cable still trades below the 50, 100, and 200 Simple Moving Averages.
Overall, bears are in the lead, but bulls are lifting their heads.
Support awaits at 1.2875, the daily low. It is followed by 1.2815, a swing low from earlier this week. Strong support is at 1.2765, which is September's low.
Some resistance is at 1.2925, the weekly high, followed by strong resistance at 1.3045, which capped GBP/USD last week. Further up, 1.3145 and 1.3180 await sterling.
More 2020 Elections: How stocks, gold, dollar could move in four scenarios, nightmare one included
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
Editors’ Picks
USD/JPY holds near 155.50 after Tokyo CPI inflation eases more than expected
USD/JPY is trading tightly just below the 156.00 handle, hugging multi-year highs as the Yen continues to deflate. The pair is trading into 30-plus year highs, and bullish momentum is targeting all-time record bids beyond 160.00, a price level the pair hasn’t reached since 1990.
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
FBI cautions against non-KYC Bitcoin and crypto money transmitting services as SEC goes after MetaMask
US FBI has issued a caution to Bitcoiners and cryptocurrency market enthusiasts, coming on the same day as when the US Securities and Exchange Commission is on the receiving end of a lawsuit, with a new player adding to the list of parties calling for the regulator to restrain its hand.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.