GBP/USD Price Forecast – Broad Based USD Price Dynamics Dictate Price Action Amid Lack of Brexit Headlines
GBP/USD is continuing to drift higher, tapping into 1.2670 in early Wednesday action thanks to a softening US Dollar, but broader market sentiment remains prone to risk shocks as investors fear a global growth slowdown, and Brexit continues to hang over the Sterling as an ever-present reminder that January is likely to unwind any gains seen in the interim. As of writing this article, GBPUSD pair is trading at 1.2659 up by 0.15% on the day as Pound bulls receive positive support from broad based USD sell-off ahead of US FOMC. The Greenback is further pressured by US President Donald Trump’s verbal intervention on Fed policy as he continues to stress that central bank should put an end to its rate hike plans. The pair is expected to continue positive price action across London market hours despite calendar scheduled to see high impact data as USD price dynamics continue to dictate momentum ahead of US FOMC update.
UK Inflation Update Unlikely To Create High Impact on GBP’s Price Action Today
UK market continues to provide bearish influence to British pound in medium term outlook as PM May has intentionally delayed the process for parliamentary vote on current Brexit deal in hopes that no-voters will be forced to support her Brexit agreement with EU as there won’t be much time left for alternative plan or attempts to renegotiate with EU if the vote is dismissed during upcoming parliamentary session in January. However intentional sabotage tactics employed by PM May has increased the ire of opposition party with their leader Jeremy Corbyn calling for a parliamentary no-vote in Theresa May’s government, which is also set to go down in January. On the release front, today’s calendar is filled with high impact news across both London and US market hours. UK’s calendar is scheduled to release inflation data today with both CPI & PPI data from UK forecast to see highly negative readings indicating economic turmoil in UK owing to ongoing Brexit uncertainties.
Meanwhile US calendar will see release of existing home sales and crude oil inventories data aside from much anticipated US FOMC rate decision. Investors await forward guidance data from central bank’s rate statement which will greatly impact short to medium term outlook for dollar denominated assets and fx pairs. When looking from technical perspective, the short-term picture shows that the positive momentum is limited, as the pair is barely holding above a flat 20 SMA and still well below a bearish 200 EMA, while technical indicators are advancing within positive ground with uneven strength. Bigger time frames maintain the risk skewed to the downside, as in the daily chart, selling interest aligned around a bearish 20 DMA rejected the intraday advance. Depending on the Fed statement the pair could either sustain gains above 1.27 handle as year comes to close or move back below 1.2590 with bears ruling price action once again.