GBP/USD – Pound buckles as Brexit deadlock worsens

After an uneventful week, GBP/USD has dropped sharply on Thursday. In North American trade, the pair is trading at 1.3080, down 0.85% on the day. On the release front, U.S. Final GDP for the fourth quarter posted a 2.2% gain, shy of the estimate of 2.4%. Unemployment claims fell to 211 thousand, easily beating the estimate of 221 thousand. The U.K. will release GfK consumer confidence, with a weak reading of -14 expected. Friday will be busy on both sides of the pond. The U.K. releases final GDP for Q4, and the U.S. will publish consumer spending and inflation numbers.

GBP/USD managed to hold its own during the week, despite the Brexit turmoil. However, the pound finally buckled on Thursday, falling sharply. This followed the parliamentary votes on Wednesday, when lawmakers rejected eight alternative options to the Brexit withdrawal agreement. Parliament is expected to vote on the withdrawal agreement on Friday, but there’s a strong chance that it too will be rejected. The EU agreed to extend the March 29 Brexit deadline until April 12, meaning that the U.K. would depart without a deal if parliament rejects the withdrawal agreement. A no-deal scenario would be damaging to the British economy, so traders should be prepared for further volatility from the pound as the chaos surrounding Brexit continues.

Global trade tensions have weighed on inflation levels in the developed economies, and the U.S. is no exception. However, with the Fed saying it will put a hold on rates until 2020, could inflation move higher? At the Fed policy meeting, policymakers lowered their inflation forecast for 2020, citing weakness in the Chinese and European economies. However, the chief economist of Credit Suisse, James Sweeney, has taken a different tack, saying that U.S. inflation could climb as high as 2.3% next year, in response to the lack of rate hikes. Sweeney said that although inflation remains below the Fed target of 2.0%, there are signs in the services sector of inflation picking up.

Muted response to news of trade talk progress

The Turkish delight that bites

GBP/USD Fundamentals

Thursday (March 28)

  • 7:15 US FPMC Member Quarles Speaks
  • 8:30 US Final GDP. Estimate 2.4%. Actual 2.2%
  • 8:30 US Final GDP Price Index. Estimate 1.8%. Actual 1.7%
  • 8:30 US Unemployment Claims. Estimate 222K
  • 9:30 US FOMC Member Clarida Speaks
  • 9:30 US FOMC Member Bowman Speaks
  • 10:00 US Pending Home Sales. Estimate 0.1%. Actual -1.0%
  • 10:30 US Natural Gas Storage. Estimate -43B
  • 17:20 FOMC Member Bullard Speaks
  • 20:01 GfK Consumer Confidence. Estimate -14

Friday (March 29)

  • 5:30 British Current Account. Estimate -22.9B
  • 5:30 British Final GDP. Estimate 0.2%
  • 5:30 British Net Lending to Individuals. Estimate 4.6B
  • 8:30 US Core PCE Price Index. Estimate 0.2%
  • 8:30 US Core Personal Spending. Estimate 0.3%
  • 9:45 Chicago PMI. Estimate 61.1
  • 10:00 UoM Revised Consumer Sentiment. Estimate 97.8

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, March 28, 2019

GBP/USD March 28 at 12:20 DST

Open: 1.3192 High: 1.3214 Low: 1.3070 Close: 1.3080

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2841 1.2910 1.3070 1.3170 1.3258 1.3362

GBP/USD posted slight losses in the Asian session but recovered. The pair edged lower in European trade continues to lose ground in North American trade

  • 1.3070 is a weak support level
  • 1.3170 is the next resistance line
  • Current range: 1.3070 to 1.3170

Further levels in both directions:

  • Below: 1.3070, 1.2910 and 1.2841
  • Above: 1.3170, 1.3258, 1.3362 and 1.3460