GBP: Signs of Stability Begin to Emerge
- With London traders out Monday for a public holiday, the week will start with a whimper.
- However, it will end with the most important data point of the week, the UK manufacturing PMI.
- Meanwhile, technically, the British Pound is better placed than it has been for a while.
Fundamental Forecast for GBP: Neutral
It’s a public holiday in most of the UK Monday so the week will likely begin slowly for the British Pound. It is also a week largely devoid of top-tier data. However, there are two data points towards the end of the week that could move the British Pound.
First up Thursday is GfK’s measure of UK consumer confidence, followed Friday by the purchasing managers’ index for the UK’s manufacturing sector. Among economists, the consensus forecast is that both fell marginally in August, consumer confidence to -13 from -12 in July and the manufacturing PMI to 55.0 from 55.1.
As always, significant deviations from those numbers could move the currency either way but, from a technical perspective, it does seem to have stabilized after its recent sharp losses. Given the sharp fall in the US Dollar Friday after Federal Reserve Chair Janet Yellen steered clear of the subject of monetary policy in her Jackson Hole speech, a better way to look at the Pound’s progress last week is to look at EUR/GBP.
That continued to climb Monday-Wednesday but then fell a little until the post-Yellen drop in the Dollar lifted it again.
Chart: EUR/GBP Hourly Timeframe (August 18-25, 2017)
That more stable trend for the Pound could well continue in the week ahead despite the start of the third round of Brexit negotiations. Few fireworks are likely and there could even be attempts to sound conciliatory, which might improve the current very bearish sentiment towards the currency and perhaps prompt some more profit-taking after its recent persistent weakness.
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at email@example.com
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