GBPUSD bounces off Pivot and May's pledge to EU leaders
GBPUSD shifts off technical level
Well, Theresa May's game of chicken I mentioned a week today is well under way. The GBP was initially rattled yesterday as the Bank of England dialled back the Growth and Inflation forecasts. Justin gave the full report here:
This fall in expectations was expected, and was to do with Brexit concerns weighing more heavily on the UK. It is obvious that businesses will be holding back investment until the Brexit saga is finalised and the BOE said that 'the uncertainty had intensified'.
2019 GDP forecast of 1.2% (previously 1.7%) 2020 GDP forecast of 1.5% (previously 1.7%) Says that CPI to temporarily fall below 2% target in coming months Cuts estimate for supply growth to 'a little below 1.5%' Inflation in one year's time at 2.35% (previously 2.10%) Inflation in two year's time at 2.07% (previously 2.12%) Inflation in three year's time at 2.11% (previously 2.03%)
The initial fall in the GBP was quickly reversed as Mark Carney revealed that once Brexit has passed there is cause for optimism. He reminded the market that it should not be thinking that a rate cut is ahead and that a no-deal Brexit is not the most likely scenario.
So, the game of Chicken continues. I still think some kind of time limit on the backstop is the common sense solution. However, that was reportedly asked for by May and then denied. See here. This is going to come down to the wire with the Brexit motion to be presented to Parliament on, drumroll please, valentines day, but there will be no valentine cards from Tusk to May this year I think. ;-)
The bid in the GBP stayed through the European and US session yesterday. The key buying zone at the 1.2900 region and Pivot point on the daily chart below has provided support. I bought into Mark Carney's optimism at around 1.2903, but holding at break even to see if this is the start of a new leg higher. Near term risk for buyers is below the 100EMA on the daily chart below and the pivot point.
p.s. Don't hold the GBP over the weekend to avoid any nasty surprises come Monday morning. Monday morning can be bad enough as it is. Close today and re-open on Monday. You'll enjoy the weekend more ;-)