GBPUSD Price Forecast – Consolidative Action To Continue Ahead of Tomorrow’s Parliament Vote
The pair is consolidative action near Friday’s highs as investors are cautious ahead of tomorrow’s UK parliament vote while Brexit optimism and US dollar’s weakness underpin GBP bulls.
GBPUSD pair had a positive close on Friday having hit 3-month highs and managing to 1.32 handle for the first time since mid-October 2018 helped by a number of positive factors. News hit the market on Friday that DUP party has decided to support PM May and vote in favor of Plan B during tomorrow’s parliamentary vote. This combined with broad-based dollar’s weakness owing to increased risk appetite in the broad market and Brexit optimism helped GBP bulls sustain positive price rally. The risk appetite was further boosted in US market hours as news of temporary re-opening of the U.S. government hit the market. But the most positive factor of all was sharp sell-off of US dollar in the broad market on news reports from Wall Street Journal that US Fed is considering to maintaining its current portfolio and ending balance sheet shrinking activities which began 2-years ago.
UK Parliament Vote Eyed For Medium To Long Term Direction Cues
This move is viewed by many a sign that Fed has decided to end its ongoing rate hike cycle and 2019 is unlikely to see any rate hikes which helped GBP bulls see sharp upside move. While the major move is unlikely to occur ahead of tomorrow’s UK parliament session, prevalent risk appetite and Brexit optimism are expected to help GBP bulls maintain its ongoing positive price action. As of writing this article, GBPUSD pair is trading flat at 1.3184 down by 0.13% on the day. The pair has maintained a consolidative price action near Friday’s highs as investors have held back from placing major bets awaiting tomorrow’s UK parliament vote outcome. However, GBP is likely to continue positive price action regardless of outcome as USD is weak in the broad market and investors believe either outcome will help sustain GBP bulls.
Tomorrow’s session is set to vote on PM May’s “Plan B” as well as labor party’s amendment that will take away government’s power to go through with no-deal exit scenario and delay article 50 deadlines in hopes of holding second Brexit referendum. Either of these outcomes will help push GBP back above 1.32 handle and sustain a bullish rally above-mentioned price levels. In case of both proposals failing to be approved during tomorrow’s session, GBP is likely to move down from 3-month highs back near 1.1340 – 1.1325 price range with further declines prevented owing to broad-based US dollar’s weakness. Investors now await a speech from ECB President Mario Draghi & BOE Governor Mark Carney scheduled later in the day for short term profit opportunities. Expected support and resistance for the pair are at 1.3165, 1.3140, 1.3100 and 1.3220, 1.3260, 1.3300 respectively.
Dollar eases as focus shifts to Fed meeting; yen and Aussie dollar gain
- Dollar marginally lower versus peers
- Aussie, kiwi dollar edge higher versus greenback
- Dollar weakens by 0.2 percent against offshore yuan
The dollar eased versus most of its peers on Monday as investors turned their attention to this week’s Federal Reserve policy meeting, with traders wagering policymakers will signal a pause in their tightening cycle.
The Federal Open Market Committee meets between Jan 29-30, and Chairman Jerome Powell is widely expected to acknowledge growing risks to the U.S. economy as global momentum weakens.
The dollar fell 0.2 percent versus the offshore yuan to 6.7406. The rally in the yuan also fuelled a bounce in the Australian dollar, which gained 0.18 percent versus the dollar to $0.7195.
Kiwi dollar strengthened by 0.3 percent to $0.6859.
“The general direction for the dollar is still down and markets will be taking cues from the FOMC this week,” said Sim Moh Siong, currency strategist at Bank of Singapore.
“The Fed will most likely keep rates steady this year given the state of economic growth outside the U.S.”
The dollar index, a gauge of its value versus six major peers was marginally lower at 95.74, after falling 0.8 percent on Friday.
A deal to reopen the U.S. government for now after a prolonged shutdown also reduced investor demand for the safety of the greenback.
‘The re-opening of Federal government after one-month shutdown fuelled ‘risk on’ rally in the US equities and slashed demand for safe-haven currency like USD, leading to sharp decline of the dollar index last Friday,” said Margaret Yang, markets analyst at CMC Markets.
Over the past two months or so, Powell and several other Fed policymakers have taken a more cautious approach on further monetary tightening, leaving the dollar underpowered after it enjoyed a boost from the Fed’s four rate increases last year.
Traders are bearish on the dollar for 2019.
Amid a weakening global economy and U.S.-Sino trade tensions, the U.S. central bank is widely expected to hold rates steady this year to avoid hurting growth at home. Interest rate futures markets are pricing in no rate hikes for 2019.
Investors are also anxiously waiting news from high-level U.S.-China trade talks on Tuesday and Wednesday to see if the world’s largest economies can reach a compromise that will end their trade war. President Donald Trump has threatened to hike tariffs on Chinese goods if there is no significant progress in the negotiations.
The yen added 0.2 percent in early Asian trade at 109.34.
The dollar has gained around 1.2 percent on the yen over the last two weeks. Not helping the yen was the Bank of Japan’s downgrade of its inflation forecasts last week when it also maintained its accommodative monetary policy, as widely expected.
Moreover, Japanese investors have been net buyers of foreign bonds over the last few weeks, stoking demand for dollars. This likely explains why the safe-haven yen has not appreciated during this period even though risks of a global economic slowdown have rattled investor sentiment.
The euro was marginally higher at $1.1411.
The single currency managed to cling on to a 0.4 percent gain made last week despite the European Central Bank downgrading its growth forecasts for the near term.
Growth data out of Europe’s economic powerhouses such as Germany and France has been weaker-than-expected and analysts expect the ECB to remain dovish for an extended period.
Traders believe Europe’s slowdown and a dovish ECB are priced into the euro, which has traded in a $1.12-$1.16 range over the last three months.
Sterling was marginally lower, fetching $1.3193.
Cable gained 2.5 percent last week after a report in the Sun newspaper that Northern Ireland’s Democratic Unionist Party had privately decided to offer conditional backing for British Prime Minister Theresa May’s Brexit deal this week.
However, Ireland’s Deputy Prime Minister Simon Coveney said on Sunday the backstop was already a compromise drawn up to meet May’s negotiating red lines, and the EU and Ireland were united in the view it “was not going to change”.
Analyst expect sterling to remain volatile. Britain is set to leave the European Union on March 29, but the country’s members of parliament remain far from agreeing a divorce deal.
Stock Market News
Nissan says co-operating with SEC inquiry after report of probe on executive pay
Nissan Motor Co said on Monday that it was co-operating with an inquiry by the U.S. Securities and Exchange Commission (SEC) after a report said the regulator was investigating the Japanese automaker’s disclosures on executive pay.
Nissan has accused its former chairman Carlos Ghosn, first arrested on Nov. 19, of financial misconduct. Prosecutors have charged Nissan along with Ghosn for under-reporting his pay. Ghosn has denied the charges.
Bloomberg, citing sources, said the SEC is examining whether the company maintained adequate controls to prevent improper payments.
A Nissan spokesman confirmed the automaker received an inquiry from the U.S. regulator, without giving further details. The SEC was not immediately available to comment on the matter.
Nissan shares were down 1.0 percent at 919 yen in mid-afternoon trade, compared with a 0.4 percent decline in the Nikkei average.
Amazon, GE, Facebook and More Major Earnings Coming This Week
Earnings season is here and most major companies are gearing up to report and set a direction for the broad markets. After suffering through the worst December since 1931, it remains to be seen if these companies can prop up the markets.
24/7 Wall St. has reviewed some of the key stocks reporting this coming week. We have included the consensus earnings estimates from Thomson Reuters and the stock price and trading history, as well as some additional color on each.
Be advised that the earnings and revenue estimates may change ahead of the formal reports, and some companies change earnings dates as well.
Advanced Micro Devices Inc. (NASDAQ: AMD) is expected to report its most recent quarterly results Tuesday afternoon. The consensus analyst estimates call for $0.08 in earnings per share (EPS) and revenue of $1.45 billion. Shares of AMD closed at $21.93 on Friday. The consensus price target is $23.70. The 52-week trading range is $9.04 to $34.14.
EBay Inc. (NASDAQ: EBAY) is set to report its fourth-quarter results after the closing bell on Tuesday. The consensus estimates are $0.68 in EPS and $2.87 billion in revenue. Shares were trading at $33.72 apiece on Friday’s close. The consensus price target is $36.18, and the stock has a 52-week range of $26.01 to $46.99.
AT&T Inc. (NYSE: T) is scheduled to report its fourth-quarter results before the opening bell on Wednesday. The consensus estimates call for EPS of $0.86 and $48.48 billion in revenue. Shares were changing hands at $30.66 on Friday’s close. The consensus price target is $34.96, and the 52-week trading range is $26.80 to $39.29.
Qualcomm Inc. (NASDAQ: QCOM) is expected to report its fiscal first-quarter results late Wednesday. The consensus estimates are $1.09 in EPS on revenue of $4.9 billion. Shares were changing hands at $51.30 on Friday’s close. The consensus price target is $67.60, and the 52-week trading range is $48.56 to $76.50.
Alibaba Group Holding Ltd.’s (NYSE: BABA) fiscal first-quarter report is scheduled for Wednesday before the opening bell. The consensus forecast calls for $1.67 in EPS on $17.59 billion in revenue. Shares ended the week trading at $159.21 apiece. The consensus price target is $201.44, and the 52-week trading range is $129.77 to $211.70.
Facebook Inc. (NASDAQ: FB) will report its fourth-quarter results late on Wednesday. Overall, analysts expect to see $2.19 in EPS, as well as $16.4 billion in revenue. Shares traded at $149.01 on Friday’s close. The consensus price target is $185.28. The stock has a 52-week trading range of $123.02 to $218.62.
Look for Tesla Inc. (NASDAQ: TSLA) to release its most recent quarterly results late on Wednesday as well. The consensus forecast calls for $2.22 in EPS and $7.07 billion in revenue for the fourth quarter. Shares traded on Friday’s close at $297.04. The consensus price target is $334.53, and shares have traded between $244.59 and $387.46 in the past 52 weeks.
Amazon.com Inc. (NASDAQ: AMZN) will report its fourth-quarter results after the closing bell on Thursday. The consensus estimates are EPS of $5.65 and $71.85 billion in revenue. Shares were changing hands at $1,670.57 on Friday’s close. The consensus price target is $2,139.52, and the stock has a 52-week range of $1,265.93 to $2,050.50.
And General Electric Co. (NYSE: GE) also reports its fourth-quarter results on Thursday. The consensus estimates call for EPS of $0.22 and $32.67 billion in revenue. Shares were last seen at $9.16. The consensus price target is $11.61. The stock has a 52-week range of $6.66 to $16.43.
Crypto Prices Drop As UK Seeks to Regulate Digital Tokens
Bitcoin and other major digital coin prices dropped on Monday in Asia as the U.K. rolled out a proposed regulatory framework on crypto assets and Malta warned of a global scam involving Bitcoin.
Last week, the U.K.’s Financial Conduct Authority (FCA) released a consultation paper to “provide regulatory clarity” on how crypto assets could be classified.
“This consultation paper is the next step in the FCA’s work on crypto assets and sets out details on where different types of crypto assets might fall in the regulatory perimeter,” the FCA said.
According to the agency, digital tokens are likely to be classified as “Specified Investments” under the Regulated Activities Order, “Financial Instruments” under the Markets in Financial Instruments Directive II, “E-Money” under the E-money Regulations, or captured under the Payment Services Regulations.
Firms issuing, trading, marketing and holding crypto assets should read the paper and provide comments to the agency. The consultation period will end on April 5.
In the meantime, the U.K. has been stepping up scrutiny in the crypto space. Last December, the U.K. tax collection service issued its first detailed tax legislation for cryptocurrency investors.
Affected by the news, Bitcoin lost 3.2% to $3,458.8 by 1:19 AM ET (06:19 GMT).
Other digital coins went down the same track. Ethereum slumped 6.9% to $107.83, XRP was down 5.0% to $ 0.29712, and Litecoin shed 4.7% to $31.226.
In other news, Malta’s Financial Services Authority warned against “Bitcoin Revolution,” calling it a typical get-rich-quick scam that operates through a few websites. The watchdog stressed that Bitcoin Revolution is not registered or licenced to provide financial and investment services in the country.
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