GBP/USD Daily Price Forecast – GBP/USD Upside Limited as Brexit Continues To Pressure British Pound

The GBP/USD traded into 1.2950 ahead of Wednesday’s London markets, catching some lift in the early Asia session but moved back into 1.293 handle as bearish pressure on Sterling had equal impact on the pair’s momentum. Brexit concerns continue to weigh on the Pound as traders await negotiations between the UK and the European Union to begin again in the coming weeks. Inflation expectations and hopes for interest rate hikes from the Bank of England (BOE) are also dragging on the Sterling, with the BOE’s McCafferty reaffirming BOE Governor Carney’s call that rate hikes will be small and slow for several years, a pace of increases that will be much lower than many GBP traders were initially hoping for. The pairs move above 1.2950 was bolstered by a step back by the US Dollar but weakness surrounding dollar seems to be coming to an end while pressure from dovish BOE & Brexit woes dragged the pair back into 1.293 handle. Odds of a no-deal Brexit continue to rise, and traders are trepidatious about upcoming negotiations, which are set to continue this month with Prime Minister Theresa May at the helm of the UK’s side of trade talks.

USD’s Weakness Dictates Momentum Amid Weak Macro Data Updates Ahead of Friday’s UK GDP Release

The BOE is also seeing fit to weigh in on Brexit, with bank members warning that a hard-Brexit could have profound short-term effects on the UK’s economy. Friday will be bringing the UK’s latest round of GDP figures, but the week is seeing a thin calendar in the run-up to Friday’s figures, and market sentiment can expect to remain at the helm of the GBP/USD’s trading direction. Brexit concerns and Friday’s looming UK GDP will continue keep the upside capped off. Sterling sees a new low for 2018 this week as the pair hit 1.2919 on Monday and any further declines will have the pair in free-fall below the 1.2900 handle. The U.S. dollar edged lower against a basket of currencies on Wednesday as its recent rally on global trade tensions showed signs of fading, while the offshore yuan steadied near a one-week high.

In a reminder of the growing trade disputes, the U.S. Trade Representative’s office said late on Tuesday that the United States would begin collecting 25 percent tariffs on another $16 billion of goods it imports from China later this month. China has vowed to retaliate to an equal degree which has investors across globe focusing on how the move from China is going to affect USD & Yuan which could greatly affect Dollar’s momentum against its global peers this week which is void of any major macro data up till Friday. With only low-tier data on the offering for Wednesday, and GBP traders will be turning their eyes to the UK’s GDP reading due on Friday. Expected support and resistance for the pair are at 1.2920, 1.2885, 1.2840 and 1.2965, 1.3000, 1.3045 respectively.