Fundamental Forecast for GBP: Bullish

The latest Bank of England voting pattern took the market by surprise with the central bank’s chief economist turning hawkish, changing the vote intention pattern to 6-3 from a previous - and expected - 7-2. In addition, the MPC said that they would consider beginning winding down the total QE stock when interest rates hit 1.5% from a previous level of 2%. Added together, and with a slightly weaker US dollar complex, GBPUSD rose from a low of 1.3100 to a current level of just under 1.3300.

On the horizon, the latest EU Summit on June 28-29 with Brexit likely to dominate proceedings, along with ongoing discussions over immigration and trade wars. The UK continues to put forward plans to leave the EU but the EU’s negotiating committee has been unbending and is still demanding clarity over the Irish border situation. Time is running out for progress to be made and continued uncertainty will take the gloss off Sterling post-Summit.

The UK data calendar does not contain any heavyweight releases with the final Q1 print at the end of the week expected unchanged. The BoE reiterated this week that it expects Q2 growth to rise from 0.1% to 0.4% and that the first quarter’s weakness was due to bad weather. Bank of England governor Mark Carney speaks on Wednesday about the Financial Stability Report although he is not expected to drift too far from the subject.

GBP-crosses have had a good week, especially against NZD and CAD where they have continued the recent uptrend, and are likely to consolidate and push further ahead over the coming weeks. A convincing break against the US dollar above 1.3300 leaves the pair room to move back to 1.34580, while on the downside the recent 1.3215 low print will act as support.

GBPUSD PRICE CHART DAILY TIMEFRAME (JANUARY – JUNE 22, 2018)

(Click on image to enlarge)