GBP/USD Forecast: Sterling Stuck In A Downward Sloping Trend

GBP/USD is trading little changed on the upside ahead of Bank of England rate hike on Super Thursday.

  • The Bank of England is expected to hike rates by 25 basis points to 0.75 percent on Thursday.
  • The US Q2 GDP increased 4.1 percent but failed to promote the US Dollar as the growth rate met the market expectations.

The GBP/USD is trading little changed on the upside above 1.3100 against the US Dollar on Monday after the Bank of England Governor Mark Carney said in an interview with Bloomberg that "low road of protectionism" will cost jobs, growth, and stability. Carney also said that within nine months we could have a disorderly Brexit stress test, indicating disorderly Brexit is one of the scenarios the Bank of England counts with.

Sterling was slammed to 1.2950 two weeks ago falling from the cyclical peak of 1.4376 on April 17 and it is struggling to find direction since falling to lows as the Bank of England is widely expected to hike the Bank rate this Thursday while economic fundamentals inclusig inflation decelerating to 2.4 percent and retail sales slumping in June weigh on a picture of strong economy in the UK.

On the other hand, it looks like the Bank of England is readying itself for all scenarios including disorderly Brexit as the political development after key ministers David Davis and Boris Johnson resignation dis not result in a better negotiation position for the UK.

On Thursday last week, the EU chief Brexit negotiator Michel Barnier said the proposal of UK for post-Brexit trade setup is not feasible rejecting what supposedly work of a new negotiating team in the UK with Dominic Raab as a new chief negotiator for the UK and Theresa May, the UK Prime Minister at the helm.

Sterling is trading within a downward sloping trend on the 4-hour chart with Momentum and the Relative Strength Index both moving within the neutral zone. The Slow Stochastics made a bearish crossover in the neutral zone indicating possible slide in prices lower.

GBP/USD 4-hour chart

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