The GBP/USD pair spent the day at the lower end of its latest range amid the absence of fresh UK-related headlines and prevalent dollar’s demand. The outlook for the Pound US Dollar (GBP/USD) grew slightly gloomier on Wednesday as markets responded to fresh hawkish comments from members of the US Federal Reserve and ongoing stagnation in the Brexit negotiation process. In the North American session, GBP/USD was trading at 1.3477 down 0.21%. On the release front, British CB Leading Index declined 0.2%. In the US, construction numbers were mixed. Building Permits remained steady at 1.35 million, matching the forecast. Housing Starts dropped to 1.29 million, short of the estimate of 1.32 million.
GBPUSD Range Bound
Macro Calendar Remains light today with no major UK related release for the rest of the week, the U.S releases Philly Fed Manufacturing Index and unemployment claims. Mixed US data, however, interrupted the greenback’s rally despite US Treasury yields extended their advances to fresh multi-year highs. However a look at hourly chart shows that USD gained additional support on Wednesday as investors responded to a sizable increase in US industrial production. The strong US dollar demand is keeping the GBP under pressure. Investors continue to show interest in buying USD when compared to bonds as they expect USD value to rise in the coming months as the Federal Reserve Bank is widely expected to raise interest rates three to four times in 2018. Analysts predict better interest rate yields for USD in coming months and see it as a less risky instrument when comparing to bonds.
GBP has managed to hold fort at 1.35 post consolidations as it has managed to maintain range for 9 consecutive trading sessions despite increase in demand for USD. Many analysts still view that USD’s continued increase in demand as an overstretched rally and term the current situation as “dead cat bounce”. Many European Analysts noted that the market has likely over-reacted when it comes down to selling the British pound and the current sterling weakness is time to reload GBP long. While the returns in long term does depend greatly on BREXIT, many investors and analysts believe and predict EU-UK friendly outcome, and are positioned for a positive swing in oversold GBP on either good news on Brexit or pickup in domestic data. Expected support and resistance for the pair are at 1.3440 / 1.3365 and 1.3587 / 1.3618 respectively.