Sterling Supported By 200-DMA Ahead Of May-Juncker Meeting

• The GBP/USD is trading little changed on the downside around 1.3030 after rising to a 2-week high.
• The market expectations of Fed minutes intensifying the feeling of a prolonged period of “patience” and monetary policy standoff weighed on the US Dollar.
• The UK Prime Minister Theresa May is meeting the European Commission President Jean-Claude Juncker in an attempt to change current Brexit agreement feeding the market hope for delayed Brexit.
• The 170 pips strong jump higher on GBP/USD is likely to experience technical pullback towards 200-DMA of 1.3000 ahead of Brexit headlines later on Wednesday.

The GBP/USD is trading little changed on the downside at around 1.3030 after the 170-pips strong jump to a 2-weeks high of 1.3077 on Tuesday as the FX market is increasingly hoping for delayed Brexit confirmation after the UK Prime Minister Theresa May meeting the European Commission President Juncker later today.

The combination of hopes for delayed Brexit, solid UK labor market report for January and general US Dollar retracement lower ahead of today’s FOMC meeting minutes saw GBP/USD rise to a 2-week high of 1.3077 with the technical correction to current levels.

While the UK unemployment rate was stuck to a four-decade low of 4.0%, average weekly earnings rose 3.4% over the year in three months to December, the Office for National Statistics reported on Tuesday.

Although it is unlikely for the UK Prime Minister Theresa May to win any major changes to current withdrawal agreement with the European Commission President Jean-Claude Juncker, the FX market is pricing in increased chances for delayed Brexit.

On the economic data front, the FOMC meeting minutes are expected to confirm patience as the main monetary policy stance of US central bankers. Cleveland Fed President Loretta Mester seen as a policy hawk said on Tuesday that the most likely scenario for the US is that the economic growth will slow this year, job growth will slow, and inflation will stay near 2% and as Fed is not far behind or ahead of curve, it can gather information on the economy before adjusting rate policy.  

Furthermore, the influential New York Fed President John Williams said that he is comfortable with the interest rates level now and sees no need to raise them again unless growth or inflation shifts to an unexpectedly higher gear.
Technically the GBP/USD broke away from the downward sloping trend that saw the currency pair fall as low as 1.2770 last week. Given the Brexit delay hopes and the expectedly dovish message from Fed minutes, the GBP/USD also broke a 200-day moving average (DMA) of 1.3000 on the upside to rise to a new 2-weeks high of 1.3077 overnight. Current pullback is likely to find solid support at 200-DMA of 1.3000 before May-Juncker meeting will shape the headlines.

The break out on the upside is also accompanied with the bullish crossover of Slow Stochastics in the Oversold territory and the reversal of the Relative Strength Index to the upside that is currently pointing lower.

GBP/USD daily chart