GBP: Trending Up Against USD, Sideways Against EUR
- GBP/USD will likely continue to rise in the coming week, which will be dominated by a meeting of the Bank of England’s monetary policy committee.
- EUR/GBP, however, may continue to move sideways.
- Also on tap: purchasing managers’ indexes for the UK in July.
Fundamental Forecast for GBP Neutral
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The Bank of England’s monetary policy committee will likely leave its benchmark interest rate unchanged at 0.25% Thursday and make no changes to either its £435 billion asset-purchase program or its £10 billion corporate-bond buying. However, the meeting could still have an impact on GBP/USD and EUR/GBP.
The MPC is expected to vote 6-2 to leave the UK’s monetary settings where they are so the first risk is that more than two MPC members vote for a rate rise. The second is that the tone of the quarterly Inflation Report is hawkish and the third is that BoE Governor Mark Carney takes a hard line at his post-decision press conference.
This perhaps means that the principal risk for GBP traders is a stronger British Pound that reinforces the current upward trend in GBP/USD, caused largely by a weaker US Dollar.
Chart: GBP/USD Daily Timeframe (Jan 2 to Jul 28, 2017)
The picture is rather different, though, for EUR/GBP, which has been moving broadly sideways for the past week and shows little sign of breaking out either upwards or downwards.
Chart: EUR/GBP One-Hour Timeframe (July 20-28, 2017)
The other major data to be released in the coming week are the UK purchasing managers’ indexes for July. Both the manufacturing index and the services index are forecast to be little changed so here the risk is evenly balanced, with strong data tending to support the Pound and weak data depressing it.
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at firstname.lastname@example.org
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