GBP/USD Forecast: Sideways Trend To Prevail As May's Brexit Is Set For A Defeat In Parliament

• The GBP/USD is trading little changed on the downside at around 1.2750 boosted by the dovish tone of the FOMC meeting minutes highlighting patience for the future moves on rates.
• The UK parliament banned the government to leave with a no-deal Brexit, in an attempt to avoid the worst case scenario.
• The opposition Labor party leader Corbyn is ready to claim a no-confidence vote almost immediately if May loses Brexit vote next week in a parliamentary speech on Thursday.

The GBP/USD is trading little changed on the downside at around 1.2750 after it rose to near 1.2800 level on Wednesday with the US FOMC meeting minutes voicing patience for the future moves on monetary policy. Sterling was also boosted by the twist in the outlook from Atlanta Federal Reserve Governor Raphael Bostic who said that he is open to a rate cut if downside risks all come to bear.

While the UK parliament is debating the Brexit deal, it becomes apparent that the Brexit deal will not be supported in a meaningful vote next week. To protect itself from the last-minute support for Theresa May’s Brexit deal rather than leaving the UK with a no-deal, the UK parliament overvoted the government protecting it from walking away with a no-deal Brexit blaming parliamentarians for the chaos. 

The UK government officials repeatedly confirmed that there is no intention whatsoever to delay the parliamentary vote scheduled for Tuesday, January 15, next week.

Later on Wednesday, the Bank of England Governor Mark Carney reiterated that future rate hikes will be “limited and gradual” while participating in an online question and answer session about the future of money at the Bank of England's Future Forum.

Technically, the GBP/USD is trading in a downward sloping trend on a daily chart while capped by a trendline and oscillating around a 50-day moving average at 1.2770. The technical oscillators including Momentum and the Slow Stochastics turned lower with the GBP/USD pulling back to mid 1.2700 expected to generate a bearish crossover in the Overbought territory in Slow Stochastics. The Relative Strength index though still remains flat.

The GBP/USD is expected to remain flat with Brexit deal defeat likely to weigh on the currency pair while markets temporarily discounted the drift in the US monetary policy outlook with Fed Chairman Powell’s speech possibly adding to a cautious stance. Even with GBP/USD resuming sideways trend and a short-term recovery towards 1.2790 or above, this is still not enough to reverse the trend. With Brexit deal uncertainty weighing on Sterling, a fundamental pressure is still in place to see GBP/USD falling further towards 1.2500-1.2440 level.

GBP/USD daily chart