Fundamental Forecast for GBP: Bullish
Sterling (GBP) Talking Points:
- Positive Brexit talks feed through into an oversold Sterling complex.
- PMIs aside, there is little data of note to reign in Sterling next week.
The DailyFX Q3 GBP Forecast is available to download.
Positive Brexit Discussions Should see Sterling Underpinned at the Very Least
A good week for Sterling bulls was driven by news of an olive branch from the EU in the long running, and often acrimonious, Brexit talks. EU chief negotiator Michel Barnier said that the single block would offer the UK an unprecedented third-country deal although picking off an a la carte menu was still off the table. The British Pound has been under pressure over the last few months as talks had seemingly stalled but this latest intervention, and the possibility of a new November EU Summit meeting, confirms that both sides are now actively working towards a ‘soft-deal’ Brexit and new trade agreements.
Discussions are now fully ongoing, and traders should still be aware that negative headlines may appear and pause the expected Sterling uptick. The market is not yet in full bull-mode so considered buying on dips, or phasing in to new long positions, may be the best plan of action going forward.
Looking ahead to next week, the data calendar is fairly clear apart from the monthly PMI readings and Friday’s BOE/TNS inflation release, but it would take fairly negative readings to derail Sterling as things stand.
Full DailyFX Economic Calendar for the week ahead. We will be taking a more in-depth look at UK data releases, Brexit and other UK asset market drivers on Monday at 10:30GMT during our UK Key Events and Markets Webinar.
GBPUSD traded back above 1.3000 on the back of the EU announcement and is now building a base as talks progress. GBPUSD remains under the spell of US monetary policy and other pairs may be a cleaner way of capturing Sterling strength.
In the DailyFX Analyst Pick Section chief currency strategist John Kicklighter looks at long GBPUSD and GBPCHF set-ups, Justin McQueen suggests GBPAUD, while Paul Robinson also prefers GBPUSD for a several day to several week set-up.
GBPUSD Daily Price Chart (February – August 31, 2018)
Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.
--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
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