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GBP/USD: a big week for the dollar, bears taking control back

  • GBP/USD: a slave to the flows and technical factors.
  • The week will pick up with key US data releases. 

Without data or Brexit news as a driving force for the pound, it appears that the GBP will be a slave to the flows and technical factors. Currently, GBP/USD is trading at 1.3345, up 0.09% on the day, having posted a daily high at 1.3385 and low at 1.3310.

"We think the GBP can trade higher against the generally soft USD in the near-term at least but we still rather feel another “shoe” is liable “drop” for the pound as the pressure for a Brexit deal rises. EURGBP should remain better supported," explained analysts at Scotiabank.

For the week ahead, the core PCE inflation reading (Thu) will be the highlight of a busy US calendar with investors mindful of the Fed's structural low US inflation concerns as noted in the latest FOMC minutes. Analysts at ING noted that "core PCE is the central bank's preferred measure of inflation - and with the prior month's reading running significantly below the 2% target at 1.3% YoY - it's no surprise why the Fed doves are sounding the alarm. We may need to see more than just a trickle up to 1.4% YoY (consensus) to spur any major inflationary sentiment."

US: Higher Treasury yields ahead - Wells Fargo

Also, markets will be closely watching for any subtle disparity of views on Fed policy and big-picture outlook for the US economy, explained analysts at ING. "Data wise there's also trade balance (Tue), second estimate of 3Q US GDP (Wed) and ISM manufacturing (Fri) - among a host of other second-tier releases - to note," the analysts explained.   

GBP/USD levels

The analysts at Scotiabank argued that GBPUSD has risen steadily from the near Nov test of weekly support in the low 1.31 area and looks well-supported near recent highs defined by the mid Oct/early NO highs near 1.3350. "Trend momentum is positive across a range of time frames, suggesting a break higher is possible, if not probable. A sustained rally through the mid 1.33s would target additional gains towards 1.36/1.37."

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