- GBP/USD has surged after the second upbeat figure cast doubts about an imminent rate cut.
- Parliament approval of Brexit, the coronavirus outbreak and further BOE speculation is eyed.
- Thursday's four-hour chart is pointing to overbought conditions after the wedge breakout.
The Bank of England may back away from the brink of cutting rates – that is some investors' impression after another positive UK economic figure sent sterling shooting higher. However, there is still one more critical publication awaiting the pound.
The Confederation of British Industry's Industrial Trends Survey – usually ignored by markets – beat expectations in and scored -22 points in January, the best since August 2019. That, alongside better-than-expected jobs figures published on Tuesday, triggered a massive rally in the pound.
GBP/USD hit a high of 1.3154 before consolidating its gains as bond markets began pricing out the chances of a rate cut in the BOE's upcoming January 30 meeting. Expectations for a rate cut had risen after weak inflation, retail sales, and Gross Domestic Product figures published last week – as well as dovish comments from members of the BOE.
Will the BOE cut or now or wait? The final word belongs to Friday's Purchasing Managers' Indexes from Makit. The preliminary statistics for January are forecast to show a bump in both the manufacturing and services sectors.
See PMIs preview: Cementing the BOE rate cut? Five GBP/USD scenarios
Beyond the BOE
The House of Lords gave its final seal of approval to the Withdrawal Bill, allowing the UK to leave the EU on January 31. Prime Minister Boris Johnson may celebrate getting Brexit done, but the road to a new trade deal – after the transition period expires at year-end – is still long. Any headlines related to future EU-UK relations may move the pound.
The coronavirus outbreak in China and other countries dominating headlines in broader markets, keeping the safe-haven US dollar bid. Authorities in the world's second-largest economy have shut down transport links to Wuhan, where the SARS-like virus originated from, a step seen as drastic. Additional headlines related to the disease may move markets.
Overall, speculation over the BOE, Brexit, and the coronavirus are set to move pound/dollar.
GBP/USD Technical Analysis
Pound/dollar has broken out of the wedge, or triangle, which has contained its price action since December. On its way up, the pair also surged above the 50, 100, and 200 Simple Moving Averages on the four-hour chart and momentum turned positive. However, the move may have gone too far. The Relative Strength Index is close to 70 – flirting with overbought conditions. This implies a correction.
Support awaits at 1.3120, the daily low, followed by 1.3080, which was a swing high earlier this week. NExt, 1.3135, 1.3110, and 1.2955 await the pair.
Resistance is at 1.3154, Thursday's peak, followed by 1.3210, a high point in early January. 1.3285, seen around Christmas, is next.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to recovery gains near 1.0850 ahead of Fedspeak
EUR/USD trades in positive territory near 1.0850 on Friday following a four-day slide. China's stimulus optimism and a broad US Dollar correction help the pair retrace the dovish ECB decision-induced decline. All eyes remain on the Fedspeak.
GBP/USD pares UK data-led gains at around 1.3050
GBP/USD is trading at around 1.3050 in the second half of the day on Friday, supported by upbeat UK Retail Sales data and a pullback seen in the US Dollar. Later in the day, comments from Federal Reserve officials will be scrutinized by market participants.
Gold at new record peaks above $2,700 on increased prospects of global easing
Gold (XAU/USD) establishes a foothold above the $2,700 psychological level on Friday after piercing through above this level on the previous day, setting yet another fresh all-time high. Growing prospects of a globally low interest rate environment boost the yellow metal.
Crypto ETF adoption should pick up pace despite slow start, analysts say
Big institutional investors are still wary of allocating funds in Bitcoin spot ETFs, delaying adoption by traditional investors. Demand is expected to increase in the mid-term once institutions open the gates to the crypto asset class.
Canada debates whether to supersize rate cuts
A fourth consecutive Bank of Canada rate cut is expected, but the market senses it will accelerate the move towards neutral policy rates with a 50bp step change. Inflation is finally below target and unemployment is trending higher, but the economy is still growing.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.