GBP/USD speculators continue to be dealt with a rather challenging trading landscape as July begins. The GBP/USD went into the weekend near the 1.26930 ratios, but this came only after the currency pair hit a low of nearly 1.25920 on Thursday. Circumstances for day traders remain choppy, particularly for those looking to find sustained short-term trends. Economic data from the U.K. remains troubling and global central banks have reignited their inflation warnings with a solid and unified drumbeat.
The high for the GBP/USD last week came on Tuesday when the 1.27600 level was challenged. The rather strong pronouncements from the Bank of England likely helped to attain this ratio, but then the GBP/USD began to sell off as concerns seemingly mount that the U.S Federal Reserve is likely not finished adding to their Federal Funds Rate. U.S. growth statistics certainly added some bearish momentum to the GBP/USD on Thursday, as the Gross Domestic Product results produced a surprising amount of growth.
Data this Week will be Rather Light and Thinner Volumes are expected in the GBP/USD
Because of the U.S. Independence Day celebrations coming this Tuesday, trading in the GBP/USD will be rather light early this week. Interestingly however the U.S FOMC Meeting Minutes will be released by the Fed on Wednesday, and important jobs data will come on Thursday and Friday from the States. The stronger than-anticipated GDP numbers from the U.S. last week surprised GBP/USD traders and the realization the Federal Reserve will likely raise its interest rate late in July has cast a sudden shadow on Forex.
The inability to sustain a climb above 1.27000 may be rather bothersome for some GBP/USD traders who assumed momentum upwards would continue. Short and near-term conditions this week may remain rather challenging and produce rather choppy technical trading until financial institutions feel comfortable with their outlooks. However, nervous sentiment may prevail this week because of the rather light trading volumes which are likely to factor into the GBP/USD because of the U.S holiday.
The expectation of a Hawkish Federal Reserve seems to be Returning
- The FOMC Meeting Minutes will express concerns about inflation, but stronger U.S. economic data is also a concern for GBP/USD traders regarding the Fed’s next moves.
- Manufacturing PMI data will come from the U.K on Monday; the outcome is expected to be close to last month’s reading.
GBP/USD Weekly Outlook:
The speculative price range for GBP/USD is 1.25870 to 1.27650
The GBP/USD produced a rather large range the past week and although the U.S. holiday will limit volume early this week, it could also raise the potential for unexpected moves if the marketplace is not balanced. Downside price action seemingly found a rather durable support level near the 1.26000 mark, yes, the GBP/USD did trade below this ratio briefly, but the ability to climb rapidly back above the mark indicates financial institutions may view this as oversold territory.
Any move below the 1.26000 that is sustained would likely mean a much stronger U.S. economic data result has become known. However, this is unlikely to prove the case. Choppy technical trading near support levels may prove to be a short-term buying opportunity for speculative buying wagers.
While headwinds may prevail on the GBP/USD this week as traders try to gain clarity regarding future U.S Fed policy regarding interest rates, one thing seems to be speculatively intriguing – the BoE may have to remain more hawkish than the U.S Federal Reserve because inflation may be worse in the U.K compared to the States moving forward. While short-term traders may not be able to take advantage of this notion, mid and long-term perspectives may continue to bet that the Bank of England will need to raise interest rates more aggressively than the Federal Reserve over the next six months. Yet, this is also a troubling prospect for the U.K. because of mortgage rate implications, thus the BoE may find itself in a rather difficult spot in which they want to raise faster than they actually can.
The GBP/USD may have some additional upside momentum that will develop in the mid-term, but trading this week should not be overly ambitious. Looking for slight upside movement on selloffs that are generated may prove productive. The week to come is likely to be highly speculative.
