GBP/USD Price Forecast – British Pound Dragged Down To 1.30 Handle On Brexit Chaos

GBPUSD pair is trading range bound having recovered slightly from previous session losses. British Pound as predicted yesterday fell sharply given the fact that neither side managed to successfully get their amendments approved. Labor party’s amendments aimed at extending article 50, and trying to stop no-deal Brexit scenario failed while on PM May’s side her proposal of Plan B is likely to be approved only in case she manages to negotiate with EU and replace Irish backstop agreement with another solution to avoid hard border. While parliament session has failed to give MP’s power to prevent no-deal Brexit scenario and extend article 50, an advisory form of amendment with no legislative force was approved which stated that UK will not leave EU without a deal. This has created a scenario of uncertainty as traders of now back to square one with uncertainties ruling the market.

Fed Forward Guidance To Provide Short Term Direction Cues

Meanwhile, EU has clearly stated that they aren’t ready for further negotiations on Irish backstop agreement that has put PM may in a fix. However, the downside move was limited well above 1.30 handle as mentioned in yesterday’s post as investors now await next parliament meeting on February 13, 2019, by which time PM May has pledged to put a revised deal if she can get one from EU. Investors still believe that as deadlines approaches and in case no-deal scenario still seems likely, UK parliament is likely to push forward with extending article 50 deadline and aim for second Brexit referendum which is the mean reason for GBP bulls current foothold above 1.30 psychological support level. Investors now await an event filled day ahead for short term direction cues. As of writing this article, GBPUSD pair is trading at 1.3083 up by 0.13% on the day.

Much anticipated Sino-U.S. trade talks between high-level representatives in a two-day session is set to begin today in Washington. Meanwhile US market will also see release of US FOMC update which is expected to provide forward guidance on rate hike plans and is expected to comment on Wall Street Journal’s reports from earlier this week on Fed’s plans to retain current portfolio ending their balance sheet shrinking activities which are expected to have long term impact on US Dollar in broad market. UK market will also see the release of Nationwide HPI data but it is unlikely to have any impact on price action. However aside from FOMC update and Sino-U.S. trade talks which are expected to provide directional cues, US market will also see release of Pending home sales data, Q4 Preliminary GDP data and ADP NFP data which are expected to provide plenty of short term trading opportunities for traders in the day ahead. The pair is likely to continue range bound action in 1.30 handle ahead of US FOMC update and could gain break above 1.31 handle in case Fed forward guidance confirms investors’ expectations that there will be no interest rate hikes during 2019.