GBP/USD shrugs off strong NFP, focuses on UK elections
GBP/USD is trading below 1.3150 but off the post-NFP lows. The US gained more jobs than expected. The Conservatives remain in the lead ahead of the debate between PM Johnson and Labour leader Corbyn.
1. Technical Overview
The Relative Strength Index on the four-hour chart is dropping below 70 – exiting overbought conditions. That may allow cable to resume its rises later on. Pound/dollar continues trading above the 50, 100, and 200 Simple Moving Averages, and upside momentum remains robust.
Resistance awaits at the recent high of 1.165, which was a peak in early November. It is followed by 1.3180 and 1.3275, which date back to the spring.
Initial support is at 1.3110, the daily low, followed by 1.3050 that played a role in May. October's peak of 1.3013 and November's high watermark of 1.2985 both switch to their new roles as support lines.
GBP/USD PRICE SENTIMENT
GBP/USD BULLISH PERCENTAGE INDEX
GBP/USD Pivot points
GBP/USD trading positions
2. Fundamental Overview
Last chance saloon for Jeremy Corbyn – the opposition leader faces Prime Minister Boris Johnson – with the PM well in the lead. Investors would prefer an outright victory for the Conservatives, and the 10-point gap – which has stabilized after having narrowed beforehand – should guarantee that.
A Tory government is set to ratify Brexit and enact market-friendly policies. Markets are wary of seeing Corbyn in Downing Street, and he will need to excel in his debate with Johnson to have a chance of achieving that.
The BBC's Nick Robinson hosts the televised encounter at 20:30 GMT, with YouGov's instant poll expected at 21:30. Most of the market reaction will have to wait for Monday. Over the weekend, new opinion polls about voting intentions are also set to impact the open.
Brits will go to the polls in six days, and tension is mounting. While GBP/USD has been on the back foot in recent hours, it is holding onto the vast majority of recent gains and trades above 1.31.
See the full preview: Five scenarios for the vote and potentially wild GBP/USD reactions.
Outside the UK election bubble
Broader markets are cheering the latest upbeat headlines related to Sino-American trade talks. The world's largest economies are seemingly closer to a deal, with China offering a goodwill gesture related to buying US agrifoods. However, such optimism has been seen beforehand, and stocks have been whipsawed by contradicting reports. Washington remains on course to slap duties on Beijing on December 15, unless an agreement is struck.
Hopes for an accord have weighed on the safe-haven US dollar while pessimism pushed it higher.
The greenback is set to react to the all-important US Non-Farm Payrolls. Economists expect an increase of 180,000 in November, better than in October, while wage growth is predicted to remain at 3% yearly. The Federal Reserve will take the data into consideration in its upcoming meeting.
- Nonfarm Payrolls Preview: Economic health vs. trade war, who will win the battle?
- US Non-Farm Payrolls November Preview: Labor market continues to defy concerns
Overall, UK politics continue dominating sterling trading, with occasional impact from US developments.
GBPUSD FUNDAMENTALS TODAY
3. Latest News & Analysis
Themes affecting the GBP/USD
SPECIAL YEARLY GBPUSD FORECAST
The Brexit uncertainty remains the biggest challenge for UK. Sterling is expected to weaken at the beginning of 2019 and rebound sharply after the Brexit uncertainty fades away. Sterling is set to chart a check mark symbol in 2019. With the UK government still working its way to the UK parliament with the Brexit agreement approval, the Brexit uncertainty is set to prevail the end of 2018 and the beginning of 2019.
Influential Institutions & People for the GBP/USD
The Pound VS Dollar can be seriously affected by news or the decisions taken by two main central banks:
The Bank of England is the central bank of the United Kingdom. Established in 1694 and privately owned in the beginning, the Bank was nationalised in 1946 so now is completely owned by the UK government. BOE's main reason to be is to maintain monetary and financial stability in the country. Some of its other tasks are producing secure bank notes, operating asset purchase facility and keeping the inflation low and stable. The bank is overseen by the Court, named used to reffer the board of directors, and is accountable to Parliament and the public.
On the other
Mark Carney is Governor of the Bank of England and Chairman of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Authority. He joined the Bank on 1 July 2013. Carney was born in Canada in 1965 and graduated from Harvard with a bachelor's degree in Economics in 1988. In Oxford University, he also received a master’s degree and a doctorate both in Ecobomics in 1993 and 1995 respectively. Before becoming the Governor of the BOE, he worked as a Governor of the Bank of Canada (BOC) from February 1st. 2008 until June 3rd. 2013.
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
BOE NEWS & ANALYSIS
ECB NEWS & ANALYSIS
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term originated in the mid-19th century, which makes it one of the oldest currency pairs.
Pound Dollar represents two economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, this pair has been suffering some turbulence due to risk related with the abandonment process from the European Union.
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity of Euro Dollar is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, the EUR/USD is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online.
The USD/JPY (or US Dollar Japanese Yen) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: EUR/USD, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. Japanese Yen has a low interest rate and is normally used in carry trades. This is the reason why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when referred to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is due to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.