GBP/USD Forecast: Sterling Stagnant Ahead Of Key EU Meeting

• The GBP/USD is trading little changed on the upside at around 1.2960 as the currency pair is trapped in a corrective move lower ahead of the UK Prime Minister May meeting European Commission President Juncker on Thursday.
• The UK Prime Minister Theresa May set herself a deadline for February 13 to re-negotiate the Brexit deal.
• Mired with Brexit uncertainty, the Bank of England is expected to hold the policy tools unchanged voicing Brexit concerns as a major economic risk for the UK.

The GBP/USD is trading little changed on the upside at around 1.2960 on Wednesday amid ongoing Brexit uncertainty after the currency pair fell as low as 1.2925 earlier on the day leaving key support level of 1.3000 behind.

The UK Prime Minister Theresa May is scheduled to meet the European Commission President Jean-Claude Juncker on Thursday discussing the Irish border backstop issue that is the biggest obstacle in Brexit deal legislative process. 

Members of the UK parliament rejected the current setup agreed by the UK government in a Brexit deal insisting on the removal of the Irish border backstop while the EU pushes its stance in a completely opposite direction. The chances of the UK Prime Minister agreeing on new Irish border backstop conditions are little even as the Irish Prime Minister is meeting the EU officials today in Brussels.

The UK Prime Minister Theresa May set herself a deadline of February 13 to re-negotiate the Brexit deal before the UK parliament will take over and most likely ask for a Brexit postponing.

At the same time, the set of January PMI data points to the general slowdown of the economic activity in the UK at the beginning of 2019 reflecting the Brexit uncertainty. Services sector PMI fell below the expectation standing at the brink of recession with a reading of 50.1 in January.

The Bank of England Monetary Policy Committee (MPC) is widely expected to leave the Bank rate unchanged voicing the Brexit uncertainties as a key risk to the economic outlook for the UK while it also might lower the short-term inflation forecast. Overall, the Bank of England will stick to its one rate hike a year policy with May the most likely timing for the rate hike once the Brexit is successfully sorted.

Technically the GBP/USD is moving within a corrective trend after breaking the downward sloping long-term trend on the upside. The continuous correction saw Sterling struggling around 1.3000 for a couple of hours on Tuesday but finally managed to break it to the downside falling past 200-day moving average (DMA) of 1.3030 and then breaking the psychological barrier of 1.3000 and 38.2% Fibonacci retracement line of 1.2970.

The technical oscillators like the Relative Strength Index (RSI) and Slow Stochastics (SS) are both pointing lower with Slow Stochastics making a bearish crossover in the Overbought territory indicating future price declines towards 1.2900 level representing a 100-DMA on a daily chart. On the upside, the 1.3000 level is expected to hold as a resistance line.

GBP/USD daily chart