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GBP/USD Daily Price Forecast – British Pound Loses Most of Overnight Gains On Brexit Woes

Colin First

The GBPUSD pair saw a highly volatile price action in the global market yesterday owing to influence from Brexit woes and FOMC update. Uncertainties surrounding Brexit caused the pair to decline sharply in early trading session yesterday, however, dovish Fed forward guidance caused the pair to recover from intra-day lows near the mid-1.31 handle and climb all the way to mid-1.32 handle in American market hours. However, the pair once again fell from intra-day high as headlines suggested that a third vote may happen on PM May’s Brexit deal next week despite House of Commons speaker rejecting the same earlier this week. Headlines also stated EU’s Juncker wanted UK to participate in EU elections in case of Brexit extension in order to avoid confusion that could occur if UK’s seat is vacated ahead of Brexit.

BOE MPC Update & EU Leaders Summit Outcome To Provide Directional Bias

Investors also took a cautious stance ahead of today’s Bank of England interest rate decision. Given the current scenario which hints at messy Brexit, investors would like to know the central bank’s stance on plans for 2019 before placing major bets. These factors weigh down British Pound in the global market resulting in the pair trading range bound in Asian and early European market hours. As of writing, this article GBPUSD pair is trading at 1.3168 down by 0.21% on the day. The pair is trading well below overnight gains as profit booking activity ahead of today’s key events also added to bearish sentiment ahead of BOE meeting resulting in decline below 1.3200 handle. Aside from the BOE interest rate decision and forward guidance update which investors are on the lookout for to gain directional bias, investors are also looking for macro data update for short term profit opportunity.

On the release front today, aside from Bank of England’s MPC update, UK calendar will see the release of retail sales data while the US calendar will see the release of Philadelphia Fed Manufacturing index. Investors are also on the lookout for EU member nation leaders summit today during which the members are expected to vote on UK’s request for the deadline extension. Given multiple key events scattered across the day, the price action of the GBPUSD pair is expected to remain highly volatile across European session and post gaining directional bias, the pair is likely to continue with momentum creating a breakout rally in American market hours. Expected support and resistance for the 1.3150, 1.3110, 1.3085/65 and 1.3285, 1.3350, 1.3380 handles respectively.

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This article was originally posted on FX Empire