- The Sterling is settling into the year's lows as trade concerns and a Brexit-heavy FSR did little to encourage bulls back into the fold.
- Thursday's thin calendar for the GBP will see US GDP figures taking front-and-center in determining market direction heading into the late week.
The GBP/USD is set up for a new low in 2018, trading just above the 1.3100 key level following Wednesday's declines from a high of 1.3230 after comments from the Bank of England's Mark Carney failed to deliver a hawkish stance that many traders may have been hoping for.
The BoE dropped their latest Financial Stability Report (FSR) yesterday, which highlighted the domestic risks from a disorderly Brexit scenario, and although the central bank is confident in the UK's ability to weather such an event, traders were sharply reminded of the rising probability of such an event, and the Sterling slumped following the FSR, driven further by Carney's comments, who pointed out the clear risk to the UK's economy from rising global trade tensions, namely the ongoing trade spat between US President Trump and China, as well as trade difficulties between the US and key allies. The double hit of cautious news was too much for GBP traders, and the GBP/USD backslid a full penny through the rest of Wednesday's trading.
Thursday is a decidedly quiet showing for the Pound, with the only notable scheduled event being a speech from the BoE's Monetary Policy Committee member Andy Haldane at 13:30 GMT, who will be giving a speech on productivity growth at the Academy of Social Sciences Annual Lecture in London.
On the US side, GDP figures for Q1 will be coming in at 12:30 GMT, and the annualized quarterly GDP is expected to remain steady at 2.2%. Economic growth within the US has been strong for 2018, and traders are expecting to see another two more rate hikes from the US Federal Reserve this year, and a positive reading for key figures will certainly help keep the Fed on track, but a sudden contraction in figures like the GDP could see expectations diminish rapidly.
GBP/USD Levels to watch
2018's current low of 1.3101 has very large target painted on its back today, and as FXStreet's Chief Analyst Valeria Bednarik noted, "the GBP/USD pair is at risk of breaking lower, according to intraday technical readings, given that in the 4 hours chart, technical indicators maintain their bearish slopes, despite the RSI is currently at 29, indicating the strength of sellers. In the same chart, the latest recovery stalled well below a bearish 200 EMA, while today's decline put the price far below a now bearish 20 SMA, also signaling further declines ahead, particularly on a break below the mentioned yearly low."
Support levels: 1.3100 1.3065 1.3020
Resistance levels: 1.3170 1.3200 1.3245