Pound gains ground ahead of GDP

The British pound has posted strong gains on Wednesday, making up for this week’s losses. GBP/USD is currently trading at 1.3347, up 0.68% on the day.

GDP expected to de-accelerate

The UK releases a host of indicators on Thursday, highlighted by the monthly GDP report and Manufacturing Production (7:00 GMT). GDP for October is expected at 0.4%, much weaker than the previous reading of 1.1%. Economic growth was a stellar 8.7% in June, but the pace of growth has fallen off since then. With Covid-19 making a resurgence and authorities imposing lockdowns, we could yet see negative growth rates.

Manufacturing Production has also tailored off sharply in the third quarter. In June, the indicator came in at 11.0%, but slowed to a negligible 0.2% in September. Analysts aren’t expecting much of a pick me up for October, with a consensus estimate of 0.3 per cent.

 

It’s Boris-Brussels time

The UK is poised to leave the European Union at the end of the year, with or without a deal. Negotiations are going down to the wire, and there have not been any assurances that a deal will somehow be reached in time. In fact, the latest news out of Brussels is anything but encouraging. EU sources have reported that Michel Barnier, the EU’s chief Brexit negotiator, has told EU ministers that the talks were tilting towards a no-deal outcome. Stay tuned – Prime Minister Johnson is meeting with European Commission President Ursula von der Leyen in Brussels on Wednesday evening, and the EU leaders are holding a summit on Thursday.

The British pound has been relatively calm, but we could see a huge shift in GBP/USD, depending on the outcome of the talks. An announcement of a deal could see the pair shoot past the 1.40 line, while a no-deal scenario could shake up the markets and send GBP/USD below the 1.3o level.

 

GBP/USD Technical

  • GBP/USD is testing resistance at 1.3401. Above, there is resistance at 1.3449
  • The pair faces support at 1.3298, followed by support at 1.3243
  • The 20-day MA remains relevant, providing support at 1.3320

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 Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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