The first week of November promises to be eventful, as we have the Fed meeting, the BOE update, and the NFP release. Read more details here.
EU Summit: what does it mean for the GBP?
The main focus for all traders of the British pound will be on the European Summit. The European leaders will decide on the prolongation of the Brexit process today. The summit will start at 19:00 MT time and may continue until Thursday’s early hours.
According to analysts, the most widely expected extension is going to be until December 31. At the same time, reportedly the EU is ready to suggest the 1-year extension until March 2020. As we know, the British Prime Minister Theresa May does not want such a long extension, as she thinks that it’s a destructive move against the British economy. Instead, she wants to request an extension until June 30. This decision is seen as too risky for the current path of the Brexit process due to the disapproval of Theresa May’s deal at the Parliament.
As the uncertainties about Brexit decision keep circulating, the length of the UK divorce process from the EU will determine the direction of the British pound.What are the possible scenarios?
- If the EU members agree on a short-term extension, the GBP will be supported. However, we need to look at the other news concerning the further May’s steps over Brexit. If the agreement with Northern Ireland’s DUP party and the cross-party talks between the Conservative and Labour parties are unsuccessful, it will hurt the British pound. In addition, French President Emmanuel Macron said that the short-term extension would be better, as it would prevent the risk of Eurosceptics during the EU Parliamentary elections next month.
- In case of the long-term extension, the GBP will also rise. However, the long-term delay will possibly weaken the GBP in the long-term period.
- If any disagreements between the EU leaders come out, the British pound will fall.
On the daily chart of GBP/USD, the pair has been testing the resistance at the central pivot at 1.3073. If this level is broken, the next resistance is placed at 1.3158. In case of negative news, the GBP will fall to the support at 1.2983, which lies near the 200-day SMA. The next support is placed at 1.2948. If we look at indicators, Parabolic SAR shows the downward movement for the pair.
Geopolitical factors and inflation remain the main drivers of financial markets. Let’s see how to use that in trading!
Great Britain will publish the Inflation Rate on October 20, at 09:00 MT time (GMT+3).
This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.