GBP/USD Price Forecast – GBP/USD Boosted By Comments From ECB’s FCP Report & Dovish Comments From Fed Chair Powell

The pound sterling yesterday leapt higher as markets brushed off building pessimism over Brexit uncertainty following the release of the UK’s financial stability report and remarks from Bank of England Governor Mark Carney. The BOE’s Financial Policy Committee (FCP), which monitors the functionality of Britain’s financial system to ensure it can fulfill its responsibilities when markets are either smooth or rocky, publishes the financial stability report which evaluates the effects of possible adverse shocks to the banking system and economy in the UK. The report released yesterday concluded that the UK financial system is “resilient” to the wide range of risks the country faces including Brexit and is strong enough to continue serving British households and business in the event economic shocks materialize.

Positive Signal From BOE Gave Sterling Breathing Space From Brexit Uncertainties

In an effort to reassure markets that the Bank of England is fully prepared regardless the Brexit outcome, Carney stated that BOE has contingency plans in place to support market functioning even in case of disorderly Brexit that has adverse effect on economy  which served as solid fundamental support for British Pound across the broad market. The positive sentiment surrounding GBPUSD pair was further boosted by dovish comments made by Fed Chair Jerome Powell yesterday when he said that U.S. interest rates were just below neutral which was in stark contrast to hawkish comments made by both Fed bigwigs and Powell himself in his previous Fed rate hike related speeches and investors have interpreted the latest comment as signal that rate hike cycle was nearing its end which caused US Treasury Yields to go lower and also saw US Greenback lose ground significantly across major risky assets in all key global markets.

As of writing this article, GBPUSD pair is trading at 1.2839 up by 0.10% on the day. On release front today, the British side of market which sees release of BOE Consumer Credit, Mortgage approvals and lending data, while US markets see the release of Core PCE Price Index, PCE Deflator, Personal spending and Pending home sales data.  The possibility for slow down in rate hike pace would increase if the core PCE prints below estimates. When looking from technical perspective, the 4 hours chart shows that the pair advanced above its 20 SMA but also that the 200 EMA heads south above the current level, while the Momentum indicator barely advances below its 100 level. The RSI indicator, on the contrary, heads north around 58, suggesting the current rally may continue during the upcoming sessions, or at least until the next Brexit negative headline gives speculative interest a reality check.