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Fundamental Forecast for GBP: Neutral

Sterling (GBP) Talking Points:

  • Bank of England ‘Super Thursday’ with inflation expectations under the microscope.
  • Budget giveaway to be crimped by no-deal Brexit planning.

The DailyFX Q4GBP Forecast is available to download.

Sterling continues to falter against an uncompromising Brexit background with no-deal expectations growing as the UK government’s internal fighting continues. Earlier this week PM Theresa May survived a meeting with the influential 1922 Conservative Committee and remains in her role, although the numbers of letters of no confidence in the Prime Minister are said to be very close to triggering a leadership contest. The EU will be looking at the internal politicking in the government closely and at present are in no rush to make any concessions – primarily over the Irish border – to help push a deal forward.

The Autumn Budget on Monday may bring some slight relief from current austerity policies, and a funding boost for the NHS, but Chancellor Hammond’s hands are tied as he continues to make contingency plans for a potential no-deal Brexit. The Chancellor is expected to change rules so that pension funds can be used to fund start-up businesses and infrastructure projects.

On Thursday the Bank of England will likely keep all monetary policy settings unchanged and may lower growth and inflation forecasts for the foreseeable future, sending out a message that interest rates are not going to be hiked until at least mid-next year. As always, all remains dependent on the outcome of UK-EU negotiations.

Brexit Effect on Pound and UK Stocks – Impact of a Deal or No Deal.

GBP: Brexit, Budget and the Bank of England

On Mondays we take an 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 77.0% net-long GBPUSD, a bearish contrarian indicator. However, recent daily and weekly shifts in sentiment give us a strong GBPUSD bearish bias.

GBPUSD continues to be hit on both sides and remains pointed to the downside. The August 15 low at 1.2662 remains the obvious target as things stand.

GBPUSD Daily Price Chart (December 2017 – October 26, 2018)

GBP: Brexit, Budget and the Bank of England

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:

Japanese Yen Forecast - Yen Price May Rise, Look Past BoJ, Eye Vulnerable Stock Markets

Australian Dollar Forecast – Australian Dollar Might Get Some Respite If Inflation Holds Up

Oil Forecast – Crude Oil Set For Third Weekly Decline Chasing Stock Markets Lower

Canadian Dollar Forecast – USD/CAD Rate Threatens Bearish Trend Ahead of U.S. NFP Report