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The calm before the storm

GBP - British Pound

It was a tough day for Sterling on Thursday, as the British currency fell to its weakest position this month, falling through the psychological barrier of 1.30 against the US Dollar. Doubts have surfaced surrounding the future of the cross-party Brexit negotiations between the Conservative and Labour parties. Pessimistic Brexit news coupled with the lack of clarity surrounding PM May’s resignation date weighed in heavily on the pound.
In a time where Brexit headlines tend to cause the largest Sterling movements, eyes turn to the U.K. GDP report, which is due to be published at 9am GMT. A positive GDP figure may curb some of Thursday’s losses against other major currencies, as signs of a resilient economy may encourage the Bank of England to accelerate its rate hiking-cycle. In contrast, negative data could leave GBP vulnerable to negative market movements and could see the currency at six-month lows against other majors. Sterling felt the force of the last quarterly GDP figures (Q4 2018), which came out below-forecast, causing GBP/USD to slip below the 1.2900 handle, ending the day at 1.2853.

Key Movers

The world’s gaze is currently fixated on the 11th bilateral trade talks between the US and China. Thursday’s Ministerial negotiations ended without a breakthrough between the economic superpowers and the tariffs Trump threatened to impose on China are still expected to go ahead, mid-way through negotiations. It is expected that when Friday’s negotiations begin, over $200 billion of Chinese goods will be taxed at a 25 percent rate, up from 10 percent. Beijing said it would strike back against the US, increasing tensions as trade talks continue. The market remains fairly stagnant despite the imposed tariffs as the market waits to see if the world’s two largest economies can reach a compromise or whether there will be a breakdown in negotiations. The U.S. Dollar has been extremely resilient as of late, due to a string of positive technical data over the past few months.
Investor’s focus now turns to U.S. CPIs, French, Italian & U.K. industrial outputs, Italian & U.K. retail sales, U.K. GDP & trade balance and Canadian labour market data. There is potential for extreme volatility across major currency pairings as Friday continues.

Expected Ranges

GBP/USD: 1.2960-1.3080 ▲

GBP/EUR: 1.1555-1.1680 ▼

GBP/AUD: 1.8550-1.8645 ▼

GBP/CAD: 1.7475-1.7580 ▼

GBP/NZD: 1.9675-1.9780 ▼