- The broad Forex market including the GBP/USD continues to be tested with shifting sentiment and cautious outlooks. The GBP/USD went into this weekend around the 1.34239 price.
- The week’s trading for the currency pair did develop solid upside. However, the move upwards and the current realm for the GBP/USD have to be considered in light of what has happened the past month. Technically the GBP/USD is within the vicinity approximately of where it was valued on the 1st of October.
Yes, on last Tuesday the GBP/USD was near the 1.32500 mark as it tested lows not seen since the 1st of August. The first days of October and August are mentioned specifically to highlight the nervous sentiment which were taking place at those times. Only a few weeks ago – the 1st of October, the U.S government shutdown and this closure appears ready to continue into this week rather stubbornly. And on the first 1st of August tariff rhetoric and fears were causing volatility in the broad financial markets because of the U.S White House.
Official U.S government data will remain absent until the shutdown ends. However, this coming Friday the S&P company will issue Flash Manufacturing Purchasing Managers Index numbers. While this might prove to be unimportant, it could actually cause a reaction because it will be insight about the U.S economy that has been lacking the past couple of weeks. The U.K will issue important data this week including CPI, Industrial Order Expectations, Retail Sales and Manufacturing PMI results.
However, the results in the GBP/USD are likely to remain rather choppy in the coming days as sentiment shifts continue to cascade through Forex. The White House is being watched regarding its renewed tariff rhetoric towards China and this could factor into currency pairs again, but it is the U.S Federal Reserve scheduled to meet and announce its interest rate decision on the 29th of October which will carry perhaps the most influence in the coming days.
The Fed is expected to cut interest rates by 25 basis points on the 29th. However there are important questions which might not get answered and financial institutions this week may remain cautious regarding outlook for near-term conditions in Forex because of potential murkiness.
- The Fed will conduct its FOMC meeting even if the U.S government shutdown is still taking place next week supposedly.
- But the Fed’s economic data it uses may be rather limited because of the shutdown which opens the door to concerns about how this will reflect upon its outlook for November and December.
- This may cause some volatility in the GBP/USD over the near-term because the late October interest rate cut from the Fed has already been factored into the currency pair.
- If the U.S government shutdown were to suddenly end this would cause widespread volatility in Forex and possibly upside for the GBP/USD, but traders should not bet on this happening – except maybe with cheap options.
The ability of the GBP/USD to move higher last week may be seen as a bullish sentiment by some day traders. But nervous lows produced early this past week highlight that nothing is normal in Forex currently, and the GBP/USD remains dynamically priced because of a lack of clarity. Nervousness is certainly a feature which will continue into the coming days and the longer the U.S government shutdown continues the greater the threat of sudden gyrations developing will grow.
Day traders should remain ultra careful in the GBP/USD in the near-term. The U.S government shutdown does not appear ready to be solved in the short-term. Perhaps the Fed’s FOMC meeting scheduled for the following week will apply some pressure for politicians to act, but perhaps it won’t. The GBP/USD may look like it remains in oversold territory for the time being, but a range around 1.33600 to 1.34800 may remain an area financial institutions consider equilibrium in the coming days.
Ready to trade our weekly forecast? Check out the best forex trading company in UK worth using.
