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Is GBPUSD Headed for 1.40?
Sterling rose to its strongest level since June on the back of U.S. dollar weakness and the prospect of a soft Brexit. On Friday, there were reports that the Spanish and Dutch support a soft Brexit that keeps Britain more closely tied with the rest of the region. The EU Parliament is also looking to soften proposals on the forced relocation of clearing houses, reducing the risk that the UK might lose such lucrative business. We’ve said it before – 2018 will be the year that a Brexit deal gets done and these are all signs that progress is being made. With that in mind, next week, Parliament will debate Brexit on January 16 and 17th, so keep an eye out for market moving headlines. Sterling will be in play with UK inflation and retail sales data scheduled for release.
Although we are looking for both reports to surprise to the downside, on a technical basis, there’s no major resistance in GBP/USD until the 38.2% Fibonacci retracement of the 2014 to 2016 decline near 1.3975. The trend is strong and further GBP/USD gains are likely.