- Sterling is pushing hard, but Brexit concerns and market sentiment continue to cap Sterling gains.
- Little UK data means the pair is exposed to swings in risk appetite as ECB rate decision looms.
GBP/USD is moving sideways ahead of the European market session, testing into highs at 1.3910.
The Sterling is grinding upwards in early Thursday trading, trying to eat away at the drop-off that occurred in the first half of Wednesday. The Pound is proving resilient, but upwards momentum is waning quickly as Brexit concerns continue to plague the UK.
The Bank of England (BOE) has a sunny outlook on the United Kingdom’s economy in the face of continuously-improving economic data, and the central bank is on pace to begin lifting interest rates, with many market analysts calling for the first in a series of small increases to begin in mid-May. Despite the good fortune and positive tone, The GBP is still being weighed down by concerns about the political and economic landscape after Brexit begins next March. Many business leaders are still unclear about what kind of regulatory framework they will be dealing with across borders, and with European Union (EU) leaders in Brussels seeming to balk at Prime Minister Theresa May’s cherry-picking of which EU regulatory agencies will continue to have a say in UK business dealings, and vice versa, the path forward is still unclear. Market participants are already keenly aware that when Brexit begins to unfurl next March, there are no substantial trade agreements in place between the EU and the UK, and the upheaval will only continue to worsen as a ‘soft Brexit’ scenario is starting to look more and more unlikely.
Little data in slated for the UK today, but the GBP/USD can still expect some knock-on volatility when the European Central Bank (ECB) releases their latest Interest Rate Decision at 12:45 GMT, and markets may buck as traders react to the ECB’s Monetary Policy Statement and Press Conference at 13:30 GMT, where ECB President Mario Draghi’s word choices will be very carefully monitored and interpreted.
The pair has been drifting upwards steadily, and despite yesterday’s close lower, remains in deeply bullish territory trading well above the 200-day SMA. While the pair is still trying to fight upwards, the H4 chart shows a bearish trendline gathering strength just beyond the current price action and a push upwards may run out of steam at current resistance. Current support levels to watch will be 1.3815 and 1.3715, while resistance is pricing in at 1.3925 and 1.4065.