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Fundamental Forecast for GBP: Bullish

Sterling (GBP) Talking Points:

  • Sterling continues its slow march higher with gains across a range of currencies, including a strong US dollar.
  • EU President Donald Tusk says a Canada+++ deal remains on the table.

The DailyFX Q4GBP Forecast is available to download.

Sterling remains better bid and bullish in the short- to medium-term after the Conservative Party conference passes without any challenge to PM Theresa May, while talk out of Brussels turns firmly to getting a trade deal in place, despite ongoing differences over the Irish border. GBPUSD is getting back to its best level of the week, and will likely extend this move, as the uptrend off the August 15 low at 1.2662 continues. Against the euro – the best Brexit barometer – the pound hit a 2 month+ high and is now looking to break below the 0.8800 level, a price last seen at the start of July.

The driver for the move is a slight shift in Brexit negotiations from arguing and being negative – on both sides – to moving forward and actively seeking a trade agreement that both sides can accept. While UK PM Theresa May continues to put forward the unpopular Chequers plan, which will not get past either the UK Parliament or Brussels in its current guise, the EU have repeated that a special deal – Canada+++ - remains on the table and ready to be signed. The +++ in the deal is still open to interpretation and may give both sides the necessary flexibility going forward to get a deal agreed.

Looking ahead, Sterling remains a ‘buy on dips’ as long as the positive trend continues, although should be cognizant of a raft of medium-importance data on the slate next Wednesday. The comprehensive DailyFX Economic Calendar for the week ahead provides traders with updated data and forecasts across all major currencies. On Monday we will be taking are regular in-depth look at important UK data releases, Brexit and other UK asset market drivers at 10:30GMT in our UK Key Events and Markets Webinar.

IG Client Sentimentdata show that retail investorsare 60.8% net-long GBPUSD, normally a bearish contrarian indicator. However, recent daily and weekly shifts in sentiment give us a mixed trading bias.

GBPUSD Weekly Price Chart (December 2017 – October 5, 2018)

GBP: Sterling Building a Base on Brexit Hopes

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

Other Weekly Fundamental Forecast:

New Zealand Dollar Forecast - New Zealand Dollar Braces as Emerging Markets, Stocks Vulnerable

Japanese Yen Forecast – Bearish RSI Signal Emerges Ahead of U.S. CPI