Sterling (GBP) Talking Points:
- Brexit continues to shift towards a soft outcome as No Deal is priced-out.
- Positive sentiment and supportive technical fuel the rally.
The DailyFX Q1GBP Forecasts are available to download including our short- and medium-term look at Sterling.
Fundamental Forecast for GBP: Bullish
We have changed our Sterling outlook to bullish for the near-term and would take a positive bias on sell-offs in the current climate. While Brexit retains the ability to generate an unexpected headline or two, wrecking even the best made plans, the overall sense is that a Soft Brexit is the most likely outcome and there is now a hardened opposition against the UK leaving the EU without a deal. The Irish Border question still has not been answered but it seems - according to media reports - that UK PM Theresa May has talked the DUP around to voting for her Plan B, suggesting that a solution has been found to this long-running problem.
Across the board GBP has had a good week, hitting multi-week and multi-month levels. As we write, the market has erased a small portion of these gains, but this is a natural occurrence in a strong market and provides another positive signal for Sterling. We have looked at various GBP-pairs over the week and the levels and bias remain intact despite today’s book squaring. In addition to the three pairs below, GBPJPY and GBPCAD also provide opportunities going forward.
Sterling also received a small uplift this week from better-than-expected UK jobs and wages data, that suggest that BoE Governor Carney will be busy if/when the Brexit is resolved. Next week, PM May’s Plan B is put before the House and the vote will provide more information on the swing towards a soft Brexit. The economic calendar shows no high impact data releases in the UK market.
Looking for a technical perspective on the GBP? Check out the Weekly GBP Technical Forecast.
GBPUSD Daily Price Chart (May 2018 – January 25, 2019)
IG Client Sentiment data show 47.9% of traders are net-long GBPUSD. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests that GBPUSD prices may continue to rise. However, the combination of recent daily and weekly positional changes gives us a stronger bullish contrarian bias.
Traders may be interested in two of our trading guides, especially in times of volatility – 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 email@example.com
Follow Nick on Twitter @nickcawley1