|

GBP/USD losing 0.25% caught in a chop, weighed by solid US data

  • GBP/USD is on the backfoot as strong US data and Brexit weigh.
  • All eyes turn to tomorrow's US GDP data ahead of the Fed and trade talks. 

GBP/USD has taken a trip to the downside in New York, falling from a high of 1.2617 to a low of 1.2439 on strong U.S. data and hard Brexit fears. 

Upbeat US durable goods orders data reaffirmed expectations that the Fed is unlikely to deliver a 50 bps rate cut at its upcoming meeting on July 30-31, fuelling a bid in the greenback which hit a high of 97.92 in the DXY.

Meanwhile, UK election risks are rising which keeps the outlook for sterling volatile for the months ahead of where a bearish bias persists. The latest comes with U.K. Prime Minister Boris Johnson announcing his key cabinet positions. Most senior positions have gone to ardent Brexiters. The pound can suffer from political uncertainties. An election by the spring is expected but a successful campaign around 31 October would likely lead to an extension of Article 50 which is where the pound could find support. 

However, if Johnson goes for a no-deal Brexit he risks disaster whatever happens, in the opinion of analysts at ING Bank:

"An economic meltdown if he manages to bypass parliamentary opposition and delivers the promised rupture, and a premature general election if Parliament blocks it. If, on the other hand, he genuinely tries to negotiate an orderly withdrawal agreement, Johnson could still deliver a symbolic Brexit by his October deadline, but also secure the transition period that Britain desperately needs."

Meanwhile, the next big event for the pair would be tomorrow's Gross Domestic Product ahead of next week's gathering of Chinese and US negotiators which clashes with the Federal Reserve's interest rate decision. An advance to a near-trend 2.0% q/q saar in Q2, down from a strong 3.1% print in Q1, is expected. "Unlike the prior quarter, we expect consumer spending to be a key engine of growth, rebounding to about 4% after a wobbly start to the year. Business investment, however, continued to slow due to heightened uncertainty while inventories and net exports were likely a drag on growth," analysts at TD Securities explained 

GBP/USD levels

Analysts at Commerzbank explained that GBP/USD is attempting to stabilise very near term, but remains contained by 2-month downtrend at 1.2538 today:

"This maintains an overall neutral to negative bias very near term and we would allow for a retest of the 1.2382 recent low. This may again hold as there is a distinct lack of downside momentum. Below 1.2366 (April 2017 low) we have very little support until the 1.2108, the 78.6% retracement of the entire move up from the 2016 low. What is interesting is that we have a 13 count on the weekly chart, however there remains scope for a further sell-off - TD support lies at 1.2184. Above the downtrend, this would introduce scope top the 55-day ma at 1.2658 and the June high at 1.2784."

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD struggles for direction amid USD gains

EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.

GBP/USD drops to daily lows near 1.3360

Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.

Gold losses momentum, challenges $4,300

Gold now gives away some gains and disputes the key $4,300 zone per troy ounce following earlier multi-week highs. The move is being driven by expectations that the Fed will deliver further rate cuts next year, with the yellow metal climbing despite a firmer Greenback and rising US Treasury yields across the board.

Litecoin Price Forecast: LTC struggles to extend gains, bullish bets at risk

Litecoin (LTC) price steadies above $80 at press time on Friday, following a reversal from the $87 resistance level on Wednesday. Derivatives data suggests a bullish positional buildup while the LTC futures Open Interest declines, flashing a long squeeze risk.

Big week ends with big doubts

The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.

Aave Price Forecast: AAVE primed for breakout as bullish signals strengthen

Aave (AAVE) price is trading above $204 at the time of writing on Friday and approaching the upper boundary of its descending parallel channel; a breakout from this structure would favor the bulls.