GBP/USD has reversed directions and moved lower on Wednesday. In the North American session, the pair is trading at 1.3204, down 0.51% on the day. The pound punched past the 1.33 line earlier in the day, but was unable to consolidate and has retreated downwards back to the 1.32 level. Still, GBP/USD managed to touch a daily high of 1.3313, its highest level since September 3rd.
Investors hoping for British GDP turnaround
After a disastrous second quarter, investors are counting on the economy posting a strong rebound in Q3. The Covid pandemic caused a sharp downturn in economic activity in Q2, and GDP fell by 19.8% (revised upwards from -20.4%). The third quarter saw a marked relaxation in health restrictions, which led to stronger economic activity, as many workers returned to work and consumers were able to shop. The estimate for GDP in Q3 stands at 15.8%, and a figure within expectations will be bullish for the pound. The UK will also release monthly GDP for September, which is projected to fall to 1.5%, down from 2.1% in August. Manufacturing Production is expected to remain pegged at a negligible 0.7% for a second straight month. Normally, this is an important event, but this time around it will be completely overshadowed by the Q3 GDP report.
Is a Brexit deal around the corner?
The agonizing twists and turns of Brexit, which have gone on since the Brexit referendum in June 2016, could finally be over. The UK and the European Union remain apart on a number of crucial issues regarding Brexit, including fishing rights and how to ensure the movement of goods between Ireland and Northern Ireland. However, the fact that there is been no public finger-pointing by either side in the past few weeks is an encouraging sign that an agreement could be announced shortly. Of course, nothing is a sure bet when it comes to Brexit. Another unofficial deadline for reaching a deal has been set, that being the European Summit on November 19th. If no deal is announced by then, it would be a strong indication of a no-deal Brexit, with the UK set to leave the EU on December 31st of this year.
- In the European session, GBP/USD put pressure on resistance at 1.3317, but then retreated. Above, there is resistance at 1.3293
- There is support at 1.3115, followed by support at 1.3073
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