- Amid limited trading, the GBP/USD currency pair is moving steadily around the 1.2658 level.
- It has not exceeded the 1.2700 resistance level since the start of trading this week, and the reaction to the US data may have an impact on determining the direction.
- In the same trading, the pound sterling is drifting down against the euro, and inflation in the European Union is decisive this week.
- In general, there are no major data from Britain this week, and the focus is likely to be on the talk of global central banks and inflation data in the euro zone.
- Recently, the pound to euro “GBP/EUR” exchange rate rose to 1.1725 on Friday before falling to near 1.1700 and trading just below that level on Monday. Technically, the 1.1765 level remains a major resistance area.
According to ING Bank, “EUR/GBP will be affected by a speech from Lagarde and Eurozone CPI data on Friday. Here we expect some stability around the 0.8550 level.” For its part, MUFG Bank still expects the GBP/EUR pair to achieve progress; “We maintain the idea of trading EUR/GBP short even though the pair struggled to regain downward momentum over the past week.”
The bank has a long-term target of 1.2080 for the GBP/EUR pair.
MUFG Bank has a positive stance on the UK's outlook; He stated, “We are more optimistic that the outlook for the British economy will improve at the beginning of this year.” Moreover, the leading indicators such as Purchasing Managers' Index (PMI) surveys suggest that growth is on the rise creating a more supportive backdrop for sterling. Also, the bank notes that the recent rise in business confidence has been stronger in Britain than in the eurozone. If this trend continues, there will be a net boost to the British pound.
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As for the Bank of England, the chances of a rate cut in June have fallen below 50%. Overall cost pressures within the economy will continue to be monitored closely. Domestic pressure from rising wages will remain an important factor for the Bank of England. Global pressures will also have an impact on Red Sea developments, which are likely to be important. According to a recent survey by the British Chambers of Commerce (BCC), more than 50% of manufacturers and exporters have been affected by shipping disruptions in the Red Sea. MUFG Bank added, "We expect the BoE to start cutting rates after the ECB and the US Federal Reserve put upward pressure on sterling in the near term. Therefore, the larger fiscal giveaway in the government's March 6 budget could provide a new impetus for further sterling gains."
On the other hand, the latest COT data showed a slight decline in long non-commercial sterling positions to 46,300 contracts from a 6-month high of 50,500 previously. In contrast, there was an increase in euro buying positions to 68,000 from a 16-month low of just under 53,000 the previous week. Meanwhile, the data suggests that the overall momentum of closing long euro positions and increasing sterling buying positions may be reaching a turning point. If this is the case, sterling will need positive fundamental developments in the UK to make further progress against the euro.
GBPUSD Expectations and Analysis Today:
During today's trading, the GBP/USD currency pair is on the verge of breaking out of a recently formed limited uptrend channel, and a move towards the support level at 1.2580 would negatively impact on the future of that channel. Thus, that will increase the bearish control, especially if US economic growth figures come in stronger than expected, supporting a path of tightening US Federal Reserve policy. Conversely, if the figures come in weaker than expected, bulls may retest the resistance at 1.2775 again, which supports the bullish turnaround.
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