CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

GBP/USD outlook: quietly consolidating while uptrend remains intact

GBP/USD remains directionless as the pair is capped at key resistance. Sideways trading expected in the short run.

GBP/USD consolidates

After rejecting resistance at $1.37 last week, GBP/USD looks to be consolidating around $1.36 as G10 FX struggle for direction. Yesterday’s dip below the 21 displaced moving average (DMA) may have suggested a short-term top at $1.37.

However, with the pair managing to close above the 21DMA the broad uptrend remains intact for now. On the UK front, newsflow has been relatively light, although coronavirus cases look to be moving in the right direction and the vaccine rollout has been a rare success for the government, keeping the pound underpinned against the euro.

BoE downplays negative rates

In light of the third national lockdown, negative rates had once again come back into the spotlight. Bank of Englang’s (BoE’s) Silvana Tenreyro continued to remain in favour of the negative interest rate policy (NIRP), noting that theoretically, rates could go to -0.75%.

With BoE governor Andrew Bailey stating that negative rates are a controversial issue, a slight hawkish repricing in OIS markets had kept the pound better bid on the crosses. Looking ahead, BoE’s Haldane is due to speak from 18:00 GMT, while commentary on negative rates will be closely watched, given that Haldane is among the most hawkish on the Monetary Policy Committee (MPC) it is likely that he will also downplay negative rates.

Upcoming pound risk events

  • 20 January 2021: UK consumer price index (CPI)
  • 22 January 2021: UK purchasing managers’ index (PMI) and retail sales

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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