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GBPUSD Outlook Buffeted by FOMC Rate Outlook and Brexit News

GBPUSD Outlook Buffeted by FOMC Rate Outlook and Brexit News

2018-09-26 10:00:00
Nick Cawley, Strategist

Sterling (GBP) and US Dollar (USD)Talking Points:

  • FOMC interest rate hike is done and dusted, according to market thinking, but Fed communication is key.
  • This weekend’s Conservative Party conference may decide Brexit, and PM May’s, future.

The DailyFX Q3 GBP and USD Forecasts are available to download.

GBPUSD is Stuck as FOMC and Brexit Negotiations Battle for Ascendancy

Sterling’s near-term fate will be decided by today’s FOMC interest decision and commentary and the upcoming Conservative Party conference where both sides of the Brexit argument will likely harden their battle lines.

Later today, the US Federal Reserve is fully expected to hike interest rates by 0.25%, for a third time this year, but post-hike commentary from Fed Chair Jerome Powell will drive market moves more than policy changes. A hawkish-take by Powell will drive the recently weak US dollar higher, while a dovish-take, including removing any accommodative language, will see the greenback continue to sell-off. Moreover, the latest Fed dot plot – Fed members assessment of benchmark interest rates going forward – will include forecasts for 2021 for the first time, giving markets a better idea of Fed thinking.

This weekend the annual Conservative Party conference kicks-off against a background of acrimony and Brexit divisions. The Prime Minister is expected to repeat her view that the much-maligned Chequers Brexit plan is the only way forward to an audience split between believers and dissenters. PM May needs to reassert her authority over the party and present a unified plan to the EU if there is to be any hope of a Brexit breakthrough. If the Prime Minister is unable to do this, rumors will strengthen of a leadership contest, heaping pressure on Sterling.

A hawkish FOMC outtake coupled with negative news form the Tory conference will put pressure on the recent reaction low at 1.30550 and open the way for a move back towards the 200-day moving average at 1.29500.

Recent Sterling (GBP) articles:

GBPUSD Price Supported by MPC Rate Hike Musings, FOMC Ahead

GBPUSD Weekly Technical Outlook: Bullish Trend Broken

GBP: Bullish Sentiment Erased by Brexit Impasse

GBPUSD Four Hour Price Chart (June 21 – September 26, 2018)

GBPUSD Outlook Buffeted by FOMC Rate Outlook and Brexit News

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

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