GBP: Sterling’s Rally May Have More Room – All Things Being Equal

GBP/USD

Fundamental Forecast for GBP: Neutral

Sterling (GBP) Talking Points:

  • Positive Brexit ‘talk’ boosts Sterling sentiment.
  • Provisional Q3 GDP data may underpin GDP.

The DailyFX Q4GBP Forecast is available to download.

We remain neutral on Sterling going into next week but acknowledge that GBP may push higher if the current, mildly positive Brexit background remains in place. The oversold nature of GBP meant that a couple of, as yet still unconfirmed, rumors over EU flexibility over the Irish border impasse and equivalence for the financial services sector, saw the British Pound move higher. Any confirmation from the EU, or even a recognition that talks on these areas are progressing, should underpin GBP at its current levels at the very least. Sterling even shrugged off a poor Markit Manufacturing PMI reading – 51.1 compared to a prior reading of 53.8 and expectations of 53.0 – the lowest print since July 2016, straight after the Brexit referendum.

Brexit Effect on Pound and UK Stocks – Impact of a Deal or No Deal.

Next week’s economic calendar is light with only the Markit services and composite releases on Tuesday of note until a deluge of UK data is released at 09:30 GMT on Friday, including the first look at Q3 GDP. Expectations are for a q/q reading of 0.6% or 0.7%, although this bout of economic strength is expected to fall back in Q4. In addition Friday, trade balance numbers and industrial, manufacturing and construction data releases may weigh or boost GBP.

Economic Calendar w/c November 4, 2018

On Mondays we will take an in-depth look at these important UK data releases, Brexit and other UK asset market drivers at 10:30GMT in our UK Key Events and Markets Webinar.

EURGBP touched a five-week high on Tuesday before falling back sharply as Brexit talk swirled around the market. The pair now trade below all three moving averages and look likely to fall back into the downward channel that started off the August 28 high.

EURGBP Daily Price Chart (April – November 2, 2018)

GBP: Sterling's Rally May Have More Room - All Things Being Equal

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— Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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