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British Pound (GBP) Outlook Increasingly Uncertain on Fish Wars and BoE/Fed Decisions

British Pound (GBP) Outlook Increasingly Uncertain on Fish Wars and BoE/Fed Decisions

Nick Cawley, Senior Strategist

GBP/USD Price, Chart, and Analysis

  • Tensions increase in UK/France fishing dispute.
  • Important BoE and Fed policy meetings next week.
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Anglo-French relations are hitting a new low as the fishing row between the two countries escalates. France detained a British trawler yesterday, and is set to fine its owners, to the anger of the UK government who have now summoned the French ambassador to the UK for a formal explanation of France’s actions. The UK government will also press the ambassador to explain the increasingly aggressive threats made by France over the fishing dispute. The UK is said to be drawing up retaliatory measures, including restricting access to UK fishing waters, according to a Daily Telegraph report.

While the fishing dispute will draw headlines over the coming days, and add volatility into Sterling-pairs, two important central bank meetings next week will steer GBP/USD over the coming weeks. The Federal Reserve meeting on Wednesday is expected to see a formal timeline for reducing bond purchases announced with tapering to begin imminently, while the Bank of England MPC meeting on Thursday may see the central change course on monetary policy. Financial markets have near fully priced-in a 15bp UK interest rate hike next week although recent commentary from some BoE policy makers suggest that an increase is by no means a done deal. Either way, the mid-to-back end of next week will be a volatile time for GBP/USD.

Keep up to date with all market-moving data releases and events by using the DailyFX Calendar

GBP/USD has been boxed in over the last 10-12 days with support around 1.3710 and resistance around 1.3835 and it is likely that this will remain the case ahead of next week’s policy outcomes.

GBP/USD Daily Price Chart October 29, 2021

Retail trader data show 41.67% of traders are net-long with the ratio of traders short to long at 1.40 to 1.The number of traders net-long is 14.25% lower than yesterday and 8.05% lower from last week, while the number of traders net-short is 10.00% higher than yesterday and 10.72% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

What is your view on GBP/USD– bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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