Market Overview

GBP/USD Forecast: Sterling Slides Below Mid 1.3100s As UK Macro Data Missed The Estimates

  • The GBP/USD slid below mid 1.3100s after being boosted by Brexit deal optimism.
  • The UK manufacturing output fell -0.2 percent m/m in August compared to a 0.1 percent rise expected.
  • Monthly UK GDP remained unchanged in August, missing the market prediction.
  • The Brexit deal optimism boosted GBP as EU and UK negotiators said the Brexit deal could be settled by Monday next week.

The GBP/USD is trading little changed on the upside at around mid 1.3100s on Wednesday, unaffected by rather disappointing UK macro data while Brexit optimism fuels the market optimism toward Sterling.

Sterling fell as low as 1.3030 n Tuesday before the news of the EU and the UK negotiating diplomats said they made progress in Brexit talks, with divorce terms possibly settled by Monday. The European Union said it no longer expects the UK to prepare a new proposal on post-Brexit Irish border issue as both sides now seek the agreement in direct talks. 

The UK macro data set was rather a disappointing one on Wednesday as UK manufacturing output fell -0.2 percent m/m in August compared with 0.1 percent rise expected and the UK August GDP remained stagnant at 0 percent m/m compared with 0.1 percent monthly increase expected. 

The UK trade balance reached a deficit of £-1.274 billion that also missed the market estimates on the upside.

Although GBP/USD showed a little immediate reaction to the UK macro news with prevailing market sentiment driven by Brexit headlines, with data missing the estimates market is likely to cap further Sterling gains.

Technically, the GBP/USD broke from the range-bound trend sideways on the upside busting the confluence resistance of 1.3103 representing a 100-day moving average and the 38.2 percent Fibonacci retracement of a move from 1.4377 to 1.2662. With Sterling moving up to 1.3184 high, Sterling is now well supported by the former resistance zone at around 1.3103. Only break below 1.3103 would open the way toward testing yesterday’s low of 1.3030 and 1.2973 representing a 50-day moving average further. On the upside, the GBP/USD need to break above 1.3220 before testing 1.3265 to resume the uptrend.

GBP/USD daily chart


Posted-In: Brexit FXStreet GBP/USDNews Forex Markets


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