Geopolitical factors and inflation remain the main drivers of financial markets. Let’s see how to use that in trading!
Boris Johnson drives the GBP up
While all eyes are on the trade talks between the United States and China, traders can profit on other events. The British pound has rallied versus the other major currencies on the growing expectations that Prime Minister Boris Johnson would win a majority at December 12 election.
The promise of Brexit is strengthening the GBP
Market’s confidence in Johnson rose after he promised to deliver Brexit by the end of January and a tax-cutting budget within 100 days of winning the vote. He also pledged to review defense, increase funding for schools, and introduce legislation on immigration to Parliament.
The Labour Party, the main competitor of Johnson and Co., issued a statement criticizing the previous policies of the Conservative Party, which has been in power for about “3,500 days”. Yet, this criticism did not waver optimism in Johnson and the GBP.
It is obvious that the Conservatives are trying to show the population how much better their majority government would be in comparison with a hung parliament – a prospect that will become reality if the Prime Minister’s party does not get enough support. So far, Johnson is leading in the opinion polls. Investors liked his latest comments a lot: as you can see from the chart of GBP/USD, they are willing to buy the pound right now, without waiting for the actual outcome of the election.
The short-term outlook for the GBP is positive, although the British currency has become somewhat overbought after soaring by more than 100 pips during one day. GBP/USD has the scope to strengthen to the resistance between 1.3170 and 1.3200. The psychologically important level of 1.30 will now offer support.
There are no doubts that GBP/USD will offer superb trading opportunities in the upcoming hours.
Main news that will drive the market in the upcoming week include CB Consumer Confidence Index, Canadian GDP, and US Core PCE Price Index
The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.
Every week we expect many interesting events that can shake the market.