GBP/USD – Pound edges higher in quiet start to week

GBP/USD has edged higher in the Monday session. In North American trade, the pair is trading at 1.2761, up 0.28% on the day. On the release front, it’s a quiet start to the week. There are no British events on the schedule. The sole U.S. indicator, ISM Non-Manufacturing PMI, dropped to 57.6 in December, down from 60.7 in November. The reading points to strong expansion, but missed expectations. On Tuesday, the U.S. releases JOLTS Job Openings.

With Britain due to leave the European Union in less than 90 days, it’s still unclear if the sides will split with a withdrawal agreement in place. On Sunday, Prime Minister May reaffirmed that she would bring the withdrawal agreement to a vote in parliament next week. However, the deal will have a tough time passing in parliament, and the government has given no indication that it has a plan B if lawmakers reject the deal. The Europeans have insisted that they will not renegotiate a new agreement, so if the deal fails, a no-deal Brexit becomes a strong possibility. Such a scenario would have a negative effect on the British economy and send the pound lower.

Federal Reserve Chair Jerome Powell made a concentrated effort to ease the volatility in the markets on Thursday. The markets had dropped sharply after the Fed’s December rate statement, which was less dovish than expected, as the Fed said it would continue raising interest rates in 2019. Powell tempered this stance with a more cautious outlook over rate policy. He said that he was aware of the risks of a slowdown in the U.S. economy and that the Fed would be patient in its policy decisions. The Fed is currently forecasting two rate hikes next year, but some analysts have forecast a rate cut next year, with the U.S. economy expected to slow down, compared to its torrid pace in 2018.

Stocks pause as focus shifts to trade talks

Improved risk appetite supports dollars demise

GBP/USD Fundamentals

Monday (January 7)

• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.6

Tuesday (January 8)

• 8:30 US Trade Balance. Estimate -54.0B
• 10:00 US JOLTS Job Openings. Estimate 7.17M

*All release times are EST

*Key events are in bold

GBP/USD for Monday, January 7, 2019

GBP/USD January 7 at 11:50 EST

Open: 1.2725 High: 1.2787 Low: 1.2715 Close: 1.2761

GBP/USD Technical

GBP/USD was flat for much of the Asian session. The pair showed limited movement in European trade and has posted small gains in North American trade

• 1.2706 is providing support
• 1.2812 is the next resistance line
• Current range: 1.2706 to 1.2812

Further levels in both directions:

• Below: 1.2706, 1.2589, 1.2488 and 1.2365
• Above: 1.2812, 1.2915 and 1.3047

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