Ongoing concerns surrounding the possibility of a no Brexit deal continue to weigh on the pound with the domestic unit remaining under downward pressure last week. GBP/USD opens roughly flat this morning hovering around the 1.2820 level heading into a week which delivers a number of key risk events for the pound. We have a UK budget release due out on Monday, followed by the Bank of England meeting and inflation report for November on Thursday. Despite this, there is no hiding from the Brexit situation, with broader risk sentiment and Brexit headlines likely to continue to dominate price action for the pound.
Focusing on Monday’s budget releases, markets will be eager to understand whether Prime Minister Theresa May’s promise of ‘an end to austerity’ and her commitments to meeting existing fiscal targets are still attainable in light of the Brexit uncertainties. Thursday’s BOE meeting is also likely to see the monetary policy committee retain their ‘gradual and limit’ rhetoric by keeping a hold on the cash rate however it will be interesting to see how the contradicting macroeconomic signals emanating from the domestic economy will; be interpreted by the central bank. A rate hike is generally not expected before May 2019.
We’re expecting the GBP/USD pair to trade between 1.2650 and 1.2960 throughout the next week, however we do see key technical resistance at 1.2865 on the topside, whilst on the downside immediate support is evident at levels nearer to 1.2810 followed by 1.2775.