Is a move below 1.30 for GBP/USD realistic?

Another day has passed with the Pound to US Dollar rate sitting tentatively above the 1.30 mark. It’s likely to act as a psychological resistance level and the move slightly below 1.30 before seeing the pair regain the losses quickly last week is a good example of this.

What may help push the pair lower is a combination of Sterling weakness coupled with a strengthening US Dollar. Over the past 6-months the greenback has gained around 10-cents against the Euro and also a similar amount vs the Pound. As talk of a trade war heats up the US Dollar has benefited owing to its safe haven status, even though the President of the US is behind many of the threats and changes.

On the other hand just last week, US President Donald Trump made it clear that he’s not happy about the strengthening Dollar, as it makes the US less competitive. He has previously accused Europe and China of manipulating their currencies in order to keep them weak, and he made similar comments again last week. The US Dollar dropped as a result and the sell-off has continued today although cable is still trading at just 1.3150.

How the Brexit unfolds from here is likely to determine cable’s (GBP/USD) movements and the talk from within the UK now is how a ‘no deal’ Brexit could pan out. This is because the plan put forward by UK Prime Minister, Theresa May following the Chequers meeting earlier in the month has caused friction within the government, as not all on board to the extent that her position is coming under question.

The new Brexit secretary, Dominic Raab has been in discussions with his EU counterparts recently and he hasn’t ruled out a ‘no deal’ Brexit taking place, and whether the UK is planning for one or not. EU leaders apparently are and this talk has pushed Sterling lower.

There is little in the way of data due out this week from the UK, so politics is likely to be the main driver the Sterling although there is some data out of the US. Thursday and Friday at 1.30pm will see the release of US jobs data and Gross Domestic Product (GDP) which could move markets depending on the releases.

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