GBP/USD Daily Price Forecast – GBP/USD Recovers Ground on Brexit Headlines Amid Risk Averse Market Owing to Sino-U.S Trade Wars

The GBP/USD is popping into 1.3160 ahead of London’s market open for Tuesday after further tariffs in the US-China trade war are set to come into effect on September 24th. Market sentiment took a step lower in Tuesday’s early trading after the US announced $200 billion in tariffs against China, and broader risk sentiment has struck a cautious tone as traders brace for reactions from China. Tuesday marks the second day in a row of little UK economic data on the calendar, and traders are looking towards Wednesday’s CPI reading at 08:30 GMT, where markets are forecasting a tick lower from 1.9% to 1.8% for the y/y figure into August. Brexit continues to be the headliner of note for the GBP markets. Hardline Brexiteers within the UK’s own government are promising to automatically vote down any deal that Prime Minister May reaches with the EU, just as Michel Barnier, the EU’s lead Brexit negotiator, finally looks set to begin working on making a workable agreement with PM May.

Thaw in Frozen Brexit Negotiations Help GBP Gain Ground

However British Pound saw positive headlines over Brexit Buzz as UK Finance Minister Philip Hammond added his voice to that chorus, stating that he was “confident” the country would be able to reach a deal this autumn and that a “no deal” outcome was unlikely, though not impossible. Furthermore, Hammond noted that a failure to reach a deal would put at risk substantial progress over the past 10 years; combined with BOE Govenor Carney warning last week that British property values could fall by 20-30% in a no deal scenario, British politicians and citizens clearly have a heavy incentive to reach a deal of some sort. It appears that Britain has a very poor BATNA, or Best Alternative to a Negotiated Agreement, giving the EU relatively strong leverage. That said, both parties still prefer to see some sort of deal to minimize the interruption to international commerce.

On that front, both sides are reportedly looking closely at creative solutions to the current deadlock over the Irish border, which is the primary sticking block to a deal. Technically speaking, GBP/USD traders have pushed cable to its highest level since July on the apparent thaw in negotiations. The pair broke above its four-month bearish trend line last week, giving buyers optimism that a durable bottom may have formed. Looking ahead, bulls will have to navigate previous resistance levels roughly every 100 pips, with 1.32, 1.33 & 1.34 handles all marking potential resistance zones. The cable is far from “in the clear” from either a fundamental or a technical perspective, but the outlook is looking cheerier for the first time since the weather started warming in mid-April. Expected support and resistance for the pair are at 1.3125, 1.3090, 1.3045 and 1.3170, 1.3210, 1.3240 respectively.