GBP/USD Price Forecast – British Pound Gains On Brexit Deadline Extension

The GBPUSD pair yesterday saw two-way price action forming “V” pattern in the hourly chart. The pair fell for the majority of the day as cautions ahead of two key European events. This caution prevented the pair from capitalizing on dovish FOMC update earlier this week. Both key events – Bank of England’s MPC statement & EU leaders summit saw a positive outcome. While Bank of England’s MPC members kept interest rates unchanged the forward guidance was positive. Comments from BOE suggested that future rate hike plans were directionless but there was a chance for a rate hike later this year even in case of prolonger Brexit uncertainties.

Brexit Deadline Extension & Weak USD Underpin GBP Bulls

Meanwhile, EU leaders summit decided to grant UK’s request for Brexit deadline extension. However, the extension came with conditions i.e.,

• A delay of deadline till 22-May-19 will be granted if UK MP’s vote to approve PM May’s Brexit deal by next week.
• Or see deadline extension till 12-April-19 to decide of future proceedings as the UK is not willing to participate in EU Parliament elections making it difficult to grant an extension for a longer tenure.

These results helped GBP bulls establish a rebound price action later in the day. Further, dovish Fed forward guidance and declining US T.Yields which weakened the US Greenback added positive support to GBP bulls. This helped the pair recover from intra-day lows near 1.30 handle all the way back above 1.3100 handle. Post recovery during Pacific-Asian market hours, the pair has been on steady consolidative action near 1.3140/20 price range ahead of London market hours. As of writing this article, the GBPUSD pair is trading at 1.3144 up by 0.11% on the day.

Moving forward, investors await macro data updates for directional cues as the trading session comes to close for the week. The prevalent weakness of US Greenback in the global market adds additional support to GBP’s positive price action. On the release front, UK calendar lacks high impact macro data updates. Meanwhile, the US calendar will see the release of Manufacturing PMI, Services PMI & existing home sales data. GBP bulls are also likely to receive positive support from investors expectations of second Brexit referendum adding to GBP’s fundamental support. Expected support and resistance for the pair are at 1.3180, 1.3230, 1.3280 and 1.3115, 1.3090, 1.3060 respectively.

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