GBP/USD slips to weekly low ahead of BOE “Super Thursday”

With the US dollar (USD) rising across the board, amid uncertainty concerning the trade deal with China, the cautious sentiment of the British pound (GBP) traders ahead of the “Super Thursday” drag GBP/USD to weekly low of 1.2837 ahead of the London open.

The mood surrounding the “Phase One” trade deal between the United States (US) and China turned sour recently. However, the greenback benefits from the move as recent speculations of the Federal Reserve’s (Fed) stop to further rate cuts are still on the table.

The United Kingdom (UK) is jostling with election campaign for December month poll wherein the Prime Minister (PM) Boris Johnson is standing tall against the opposition Labour party leader and doesn’t hesitate using harsh words against the opponents. The recent resignation by the Labour Deputy, Tom Watson, and a receding volume of the allegations that the Tory leader tried saving Russian hackers could be considered as the backing force. Brexit seems to command less market attention even if the European Union (EU) diplomats are trying to spoil the Brexiteers’ image.

Markets will now look forward to the Bank of England’s (BOE) monetary policy decision and the Quarterly Inflation Report (QIR) for fresh impulse. While broad consensus favors no change in the current monetary policy, amid Brexit uncertainty, joining a downward revision to growth and inflation forecasts, traders will particularly be interested in Governor Carney’s speech for details.

TD Securities seems to follow the suit while saying, “We expect the long period of increasingly entrenched uncertainty to make its mark on the macro forecasts, with downgrades to growth and inflation. We also look for the BoE to take another dovish step, replacing its hiking bias with more two-way risks. While we look for a 9-0 vote, there is also substantial risk of dovish dissents with up to 2 votes in favor of rate cuts. We see little risk of an outright hawkish outcome today, with our hawkish risk being one where the BoE makes as little change to the August/September stance as possible, trying to avoid making waves during the general election campaign.”

Other than BOE related events, a speech from the UK Chancellor Sajid Javid and second-tier data from the US, coupled with comments by the President and CEO of the Federal Reserve Bank of Dallas Robert Kaplan, will also be observed.

Technical Analysis

A daily close below 21-day Simple Moving Average (SMA) level of 1.2837 could extend recent declines towards October 24 low of 1.2787 and then to a 200-day SMA level of 1.2706. Alternatively, two-week-old falling trend line at 1.2955 will stop buyers targeting 1.3000 mark.