Sterling News and Talking Points:
- Sterling has taken a leg lower as UK rate hike calls now look 50/50.
- GBPUSD under pressure as higher US bond yields support the greenback.
- ECB President Mario Draghi has a tricky policy announcement on Thursday.
The DailyFX Q2 Trading Forecast s for GBP, USD and EUR are now available.
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Sterling Traders Mull the Future
Sterling traders are likely to be on the sidelines ahead of the first look at UK Q1 GDP on Friday with market expectations for a further slowdown to 0.3%. While traders may have already factored this in, any beat to the downside will shake the British Pound lower. Expectations for a UK rate hike have dropped from around 85% to a current 50% and GBP may move further lower if the hike is delayed, probably until August.
GBPUSD is also under downside pressure from a resurgent US dollar that is finding support from ever higher US Treasury yields. With the US economic cycle at a different stage than both the UK and the Euro-Zone, rate differentials will drive currency pairs involving the three major currencies.
How are Retail Traders Currently Positioned in GBPUSD and why does it matter?
ECB President Mario Draghi will announce the latest central bank settings on Thursday – all expected to be unchanged – but it will be his comments on the ongoing bond buying program and his views on the strength of the economy and the ongoing lack of inflation that will draw interest. EURUSD looks under pressure at the moment and a combination of a weak EUR and a strong USD could drive the pair a lot lower.
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GBPUSD Daily Price Chart (August 2017 – April 23, 2018)
--- Written by Nick Cawley, Analyst.
You can contact the author via email at nicholas.cawley@ig.com or via Twitter @nickcawley1.
