gbpusd drops despite stronger gdp as brexit bill published 2685392017

The greenback has got a little bit stronger and the Dollar Index is again trying to form a base around that 100 level. It looks like the EUR/USD’s rally has run out of juice, the USD/JPY has bounced back and now the cable could be the next domino to fall. This morning’s UK GDP figures surprised to the upside, yet the pound failed to respond positively to the news as it suffered in a typical “buy the rumour, sell the fact” type of a reaction, except that there were no rumours per se. Sterling has been appreciating noticeably in recent days as traders continued to unwind their Brexit trades – until today.

The economic outlook for the UK remains bleak even if the Brexit vote itself hasn’t had any material impact on the economy yet. The pound would do very well to get back to $1.40s again. The full impact of Brexit will not be felt for months – or even years – but the uncertainty will most likely prevent sterling from appreciating significantly in the interim. So get used to seeing see more chop and churn in GBP for the foreseeable future.

Meanwhile legislation paving the way for Theresa May’s government to start the process of leaving the European Union has been published after the Supreme Court ruled parliament’s approval would be necessary on triggering Article 50. MPs will debate on the Brexit process from Tuesday of next week. The pound could pause for breath ahead of the debate.

Now the pound may have carved out a long-term bottom at $1.20 as we reported earlier in the week. It could be on the way of hitting $1.30 in the coming weeks. BUT today, the bullish trend looks to have come to an end as far as the short-term outlook is concerned. The 4-hour chart of the cable, below, shows that price has respected resistance at the 1.2650 area – this being the last support pre breakdown (circled). Consequently, it may pull back towards 1.2530-50 area (prior resistance) before potentially bouncing back. However a much deeper correction could be on the way if this area fails to hold as support.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.