- GBP / USD is trading sideways on the day at 1.3560, having failed in a previous attempt to rise above 1.3600.
- Traders for the pound are on hold ahead of key US inflation data on Wednesday and UK GDP data on Tuesday.
It was a moderate session for him GBP/USD, with the pair ready to end the session lateralized at 1.3565, having oscillated between highs above 1.3600 and lows at 1.3520. It seemed to attract selling interest at the 1.3600 level, as it also coincides very well with last Tuesday’s low. But the selling momentum quickly faded, and forex market participants are likely to stay out of the water ahead of the week’s two biggest data releases for the pound; the US October Consumer Price Inflation Report, to be released at 13:30 GMT on Wednesday, and the UK’s Preliminary Q3 GDP Growth Estimate, to be released at 07: 00 GMT on Thursday.
Members of the Fed and the BoE made statements today, but neither added anything new to the policy debate and thus did not change the dial of currency markets. Much attention has been paid to a sharp drop in US yields, a move that has not been reciprocal in UK bond markets, although the move in US / UK rate spreads Sterling’s favor on Tuesday did not seem to help GBP / USD. That could be because Brexit remained in the headlines on Tuesday. Essentially, the EU is threatening to take countermeasures if the UK chooses to activate Article 16, which allows it to unilaterally suspend parts of the Northern Ireland Protocol. The risk of no-deal Brexit is back on the table.
If Brexit risks materialize (i.e. the EU suspends much of the existing UK-EU trade deal in retaliation for the UK’s activation of Article 16), the British pound is likely to be seen. subjected to more severe pressure. In this case, a downward movement is expected towards annual lows at 1.3400. In fact, the technical momentum seems to point in this direction; Tuesday’s price action saw the GBP / USD test and respected a downtrend that has been in play since late October, indicating that the pair is likely to continue lower.