Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
British Pound Hit By Trade War Crosswinds But Brexit Looms Large

British Pound Hit By Trade War Crosswinds But Brexit Looms Large

What's on this page
GBPUSD 2 Hour Price Chart

BRITISH POUND FORECAST: NEUTRAL

  • Trade war worries fuel bifurcated British Pound trade, but...
  • ...Brexit considerations still in focus for trend development
  • Soundbites from G7, UK/EU officials might spark volatility

Get our free guide to help build confidence in your Euro trading strategy !

The British Pound has not been immune to crosswinds from increasingly acute worries about slowing global growth as the US-China trade war escalates, but Brexit considerations have taken top billing. It has lost about 1.5 percent against an average of pro-risk currencies like the Australian and New Zealand Dollars while shedding close to 4 percent against the anti-risk US Dollar, Yen and Swiss Franc.

That it has fared better against cycle-linked FX speaks to those units’ outsized sensitivity to the realized and expected downturn in economic activity as tit-for-tat tariffs and bellicose rhetoric disrupt supply chains anchored to the US-China trade route. Weakness against both ends of the sentiment spectrum suggests worries about a disorderly divorce with the EU continue to be front-of-mind for investors.

COMMENTS FROM G7, EU AND UK OFFICIALS MAY SPARK KNEEJERK VOLATILITY

From here, the G7 leaders’ summit in Biarritz, France over the weekend might offer something of a lead for the week ahead. Brexit will almost certainly come up in discussions, but the expected absence of a joint communique means traders will be relegated to parsing whatever sideline soundbites the attendees are gracious enough to offer. The outing may yet pass with a whimper.

Sporadic pronouncements from MPs drawing the battle lines for the domestic Brexit debate before Parliament return from summer recession on September 3 might generate one-off bursts of kneejerk volatility. Similarly-flavored comments from assorted EU bigwigs could nudge prices one way or another, but lasting follow-through will probably have to wait for substantive developments with concrete policy implications.

TRADE WAR ESCALATION TO DRIVE UNEVEN BRITISH POUND PERFORMANCE

On the data front, a week shortened by a UK bank holiday on Monday offers few highlights. A light sprinkling of domestic statistical releases seems unlikely to alter the outlook in a material way. This leaves the door open to external influence. Trade war rhetoric might heat up before the latest tariffs trigger on September 1. A repeat of Sterling’s bifurcated performance against risk-geared assets could follow.

--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

BRITISH POUND TRADING RESOURCES

OTHER FUNDAMENTAL FORECASTS:

Gold Prices May Rise if US GDP Data Boosts Fed Rate Cut Bets

US Dollar Vulnerable to Slowing Durable Goods Orders, 2Q GDP Revision

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES