British Pound (GBP) Weekly Forecast: Attempts to Recover as Sentiment Shifts

GBP Analysis & News

• The lack of economic data leaves GBP crosses dependent on market sentiment
• GBP attempts to recover after a bad start to the week

With another empty weekly economic calendar ahead for the UK, I would expect GBP pairs to remain sensitive to overall market sentiment amid an array of dominant market themes. With new Covid-19 variants spreading rapidly across Europe, economic growth projections have come under question as more people are told to self-isolate. In the UK, essential food retailer staff will be excluded from the 10-day mandatory quarantine if someone has been in close contact with a Covid-positive person as supermarkets were showing increasing shortages in goods.

On the other hand, a strong start to the Q2 earnings season has kept equities supported and is helping to dissipate some of the negative sentiment in markets. Central banks are also playing a key part with an array of mixed messages from policy setters as inflation rises rapidly but growth remains a key concern. Next Wednesday will see the Federal Reserve deliver its last monetary policy meeting before the Jackson Hole symposium in August, and I would expect market participants to be keeping a close message to Powell’s commentary in order to gauge market sentiment further. If he ventures away, even slightly, from his “transitory inflation” argument then we could see the US Dollar picking up some further support in the market, likely bringing the Pound down further.

GBP/USD & EUR/GBP Daily Chart

Looking at GBP crosses, GBP/USD struggling to consolidate bullish momentum but seems to have found some short-term support at 1.3719 during Friday’s session. This area has previously been important for the pair so we may see some back and forth around it before a break higher can be achieved, similar to what happened back in March. If so, 1.38 is the area to break as bulls likely have their eye set on the psychological 1.40 area. Alternatively, we could still see some further pullback in GBP/USD which means that the area between 1.37 and 1.3719 is key to watch out for.

For EUR/GBP we saw an unexpected bounce well above the descending channel this week but the pair has now come back within its range, signaling further bearish pressure to come if price is contained below 0.8560. If not, 0.8573 could act as short-term support as bulls attempt to break above 0.86 once again.

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— Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on Twitter @HathornSabin