Cable On Key Support
GBPUSD is sitting on a key support level ahead of the upcoming BOE rate decision due at the top of the hour. The market is widely expecting the BOE to cut rates while signalling room for further rate cuts in coming months. Indeed, despite the run up in GBPUSD we’ve seen in recent weeks, the market is currently pricing in 1% worth of cuts this year. This dovish view is a response to the uptick in economic risks seen around the ongoing US trade war. If the BOE leans on the dovish side in its guidance and this market view holds, GBPUSD is likely to break lower today. However, if we hear a less dovish outlook from the bank, this could spark some uncertainty in that rates outlook, keeping GBP supported near-term.
US/UK Trade Deal
If the BOE does take a less dovish approach today, that could potentially be based on news of an expected US/UK trade deal to be announced today. Much of the current dovish view is based on the economic fallout of the US/UK trade war. However, if the two sides announce a deal today, this could alleviate much of that concern, particularly if the baseline 10% tariff is scaled back or removed. As such, the BOE could signal the potential for a lessening of UK economic risks, requiring less support from the bank if seen. Consequently, news of a trade deal today could drive GBPUSD higher regardless of the bank cutting rates, though any rally will likely be offset by a larger push higher in USD.
Technical Views
GBPUSD
The rally in GBPUSD has stalled for now into the 1.3436 level and the bull channel highs with price since consolidating between 1.3258 and resistance above. While still within the bull channel, focus is on a continuation higher. However, if we break current support, focus turns to 1.3033 and the bull channel lows next, in line with bearish momentum studies signals.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.