GBP/USD – British pound ahead of next Brexit round

GBP/USD has ticked lower in the Monday session. In North American trade, the pair is trading at 1.2869, down 0.03% on the day. On the release front, U.S. banks are closed for a holiday, and there are no U.S. or British indicators. British Prime Minister May is expected to speak as she tables a new Brexit proposal. On Tuesday, the U.K. releases wage growth and the budget deficit.

Last week’s political drama surrounding Brexit triggered sharp swings in the British pound, but GBP/USD ended the week with minor gains. Will the volatility continue this week? It was a rough week for Prime Minister May, as her Brexit withdrawal deal was dead on arrival in parliament. This was followed by a no-confidence vote which May narrowly survived. May must now table a new Brexit proposal and submit it to parliament on Monday. The new proposal is sure to be opposed by many lawmakers, and it’s unclear what happens if parliament rejects the revised agreement. Surprisingly, despite the political turmoil, the pound has posted five successive winning weeks. Will the upward trend continue?

Investors were greeted with weak data on Monday, as China released GDP numbers. The world’s second largest economy continues to expand, but GDP has been softening, pointing to an economic slowdown. China reported that GDP had slowed to 6.6% in 2018, marking its lowest level since 1990. GDP for the fourth quarter dipped to 6.4%, compared to 6.5% in the previous quarter. The soft GDP release comes on the heels of soft trade and manufacturing data. A decline in China could send the Japanese economy into recession, as the export and manufacturing sectors are heavily dependent on Chinese demand.

The Trump administration has threatened further tariffs if a deal is not reached by March 1, but a second round of negotiations between the sides is scheduled for the end of the month in Washington. Chinese officials will be under pressure to show more flexibility in the talks, in order to stem the economic bleeding.

China growth matches forecast

Asia Open: What to watch this week; China data coming up first

Risk appetite to be tested on geopolitical concerns

GBP/USD Fundamentals

Monday (January 21)

  • Tentative – British Prime Minister May Speaks

Tuesday (January 22)

  • 4:30 British Average Earnings Index. Estimate 3.3%
  • 4:30 British Public Sector Net Borrowing. Estimate 1.1B
  • 4:30 British Unemployment Rate. Estimate 4.1%

*All release times are EST

*Key events are in bold

GBP/USD for Monday, January 21, 2019

GBP/USD January 21 at 9:50 EST

Open: 1.2873 High: 1.2886 Low: 1.2831 Close: 1.2869

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2589 1.2706 1.2812 1.2915 1.3047 1.3144

GBP/USD was mostly flat in the Asian session. The pair posted slight losses in European trade but then recovered and moved higher. GBP/USD is showing limited movement in North American trade

  • 1.2812 is providing support
  • 1.2915 is the next resistance line
  • Current range: 1.2812 to 1.2815

Further levels in both directions:

  • Below: 1.2812, 1.2706, 1.2589 and 1.2488
  • Above: 1.2915, 1.3047 and 1.3174

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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