GBPUSD Testing Downside as Brexit Votes Loom
GBP news and analysis:
- The UK Government faces a testing week in the House of Commons as lawmakers vote on a series of amendments to the EU withdrawal bill.
- If any of the amendments to the bill passed by the House of Lords are also passed by the Commons that would destabilize the Government and put downward pressure on GBPUSD.
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GBPUSD at risk as Brexit bill is debated by UK lawmakers
The UK Government faces a testing week in the House of Commons as lawmakers discuss a series of amendments to the EU withdrawal bill that have been passed by the House of Lords. If any of the amendments to the Brexit bill are passed by the Commons, that could put the Government in deep trouble and weaken GBPUSD.
The votes come at a critical time for UK monetary policy ahead of a meeting of the Bank of England’s rate-setting monetary policy committee next week. Interest rates will likely be left unchanged, particularly as there is no Inflation Report published alongside the committee’s announcement and the minutes of the meeting.
GBPUSD Price Chart, Hourly Timeframe (May 8 – June 12, 2018)
Moreover, a rate rise later in the year has become increasingly unlikely after the latest UK economic data. Figures released Monday for UK trade, industrial production, manufacturing output and construction were all disappointing, while numbers released Tuesday showed lower than expected earnings growth – all suggesting a weak economy and little need for higher rates to dampen the economy and combat inflation. The only bright spot was news that the UK economy is still creating jobs while the unemployment rate remains at multi-decade lows.
As for the technical outlook, GBPUSD is currently testing support from a rising channel in place since late April and any break below the lower bound of the channel could well lead to further losses. However, retail trader sentiment data suggest a more positive outlook.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that GBPUSD may soon move higher despite the fact traders remain net-long.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.