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GBP/USD Slips Ahead of BoE's Carney and US President Trump's Thoughts

GBP/USD Slips Ahead of BoE's Carney and US President Trump's Thoughts

Nick Cawley, Strategist

Sterling Talking Points

- GBP/USD hits a one-week low, and trades back below 1.4000, as a combination of Sterling profit taking, political bickering and a resurgent US dollar weigh on the pair.

- BoE governor Mark Carney will appear before the House of Lords Committee this morning while US President Trump will give his first State of the Union speech much later in the day.

Sterling Erases Last Week’s Gains Against the US Dollar

A period of consolidation, and profit-taking for the British Pound after having hit a post-Brexit high of 1.43450 last week against the greenback. The pair currently trade either side of 1.4000 as the US dollar bounces back from levels last seen four years ago, driven primarily by a slightly more conciliatory tone adopted by US President Trump last week in Davos.

GBP has also been forced lower as pressure builds on UK PM Theresa May with many commentators now saying that her days in No. 10 are numbered with Brexit negotiations proving more difficult than previously thought. The recent strength in Sterling has been predicated on thoughts that both sides will push for a softer Brexit, keeping economic upheaval to both sides to a minimum.

BoE’s Carney at the House of Lords, President Trump’s First State of the Union Speech

Ahead UK central bank head Mark Carney will appear before the House of Lords Economic Affairs Committee. This is the Committee’s annual evidence session with the governor to explore current economic concerns and to get the BoE’s response. And much later in the US session today – and very early Wednesday morning in the UK – US President Donald Trump will give his first, formal, State of the Union speech, with his views on immigration, infrastructure and trade all likely to feature prominently.

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GBPUSD Price Chart Daily Timeframe (August 2, 2017 – January 30, 2018)

GBP/USD Slips Ahead of BoE's Carney and US President Trump's Thoughts

Chart by IG

GBPUSD Client Sentiment Giving No Clues

IG Client Sentiment data show 38.0% of traders are net-long with the ratio of traders short to long at 1.63 to 1. In fact, traders have remained net-short since Dec 28 when GBPUSD traded near 1.33774; price has moved 4.6% higher since then. The number of traders net-long is 2.4% higher than yesterday and 14.0% higher from last week, while the number of traders net-short is 5.7% higher than yesterday and 17.7% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.

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--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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