British Pound Latest: GBP/USD And EUR/GBP Eye US Data And ECB Meeting

By Nick Cawley of DailyFX

Thursday, October 27, 2022 5:45 AM EST

The Rishi Sunak relief rally in the Sterling is starting to fade and traders are now turning back to fundamentals, and technicals, to value the currency. Sterling has outperformed a wide range of currencies since Rishi Sunak took over No.10 and yesterday’s announcement that the mini-budget would be pushed back from October 31 to November 17 also gave the British Pound a lift. According to Foreign Minister James Cleverly, both PM Sunak and Chancellor Hunt wanted to ‘get it right’ and make sure next month’s budget matched government priorities.

GBP/USD is trading on either side of 1.1600, aided in part by the US dollar weakness. While the Fed is expected to hike rates by 75 basis points at its next meeting, traders are now looking for clues that the central bank may begin to ease back on additional, oversized rate hikes. Today’s advanced look at US Q3 GDP, released at 13:30 BST, will give the market a clue as to how recent rate hikes have affected the US economy in the third quarter, and any miss or beat of expectations will shift the Fed rate hike narrative again.

Cable is now mid-range between first-line support at just under 1.1500 and resistance at 1.1740. The pair may look to consolidate in this range over the next few days ahead of next month’s Fed (November 2) and BoE (November 3) monetary policy decisions.

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GBP/USD Daily Price Chart

(Click on image to enlarge)

Chart via TradingView

Retail trader data show that 49.18% of traders are net-long with the ratio of traders short to long at 1.03 to 1. The number of traders net-long is 2.33% lower than yesterday and 13.52% lower than last week, while the number of traders net-short is 4.11% lower than yesterday and 10.99% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

EUR/GBP is looking mixed ahead of today’s ECB policy meeting with the central bank fully expected to hike rates by 75 basis points. EUR/GBP has been pushed lower in the past few days by renewed GBP strength, but today’s meeting may help to support the single currency, especially if President Christine Lagarde keeps her hawkish outlook on the economy. The daily EUR/GBP chart looks mixed and traders may be better off waiting until after the ECB meeting today before entering into any trade.