- The British Pound should continue to benefit from the prospect of higher UK interest rates in the fourth quarter despite Brexit confusion and UK political concerns.
- However, while GBP may have a fundamental advantage over many other currencies, GBP/USD is ripe for a large trending move lower.
Once again, the British Pound shrugged off the dire predictions of analysts worried about Brexit and a chaotic political situation in the UK to climb against the US Dollar in the third quarter of 2017. Boosted by a growing conviction that UK monetary policy was about to be tightened, it continued to make headway – admittedly helped by the persistent weakness of the Greenback – and in the fourth quarter, there’s no reason to expect that to change.
However, the technical outlook does not look as rosy as the fundamental picture painted. There is a cluster of wave relationships and resistance forming from about 1.37 to1.39. Therefore, GBP may have a fundamental advantage over many other currencies, but GBP/USD is ripe for large trending move lower.
Moreover, if the UK Government collapses completely and a new General Election is called and won by the Opposition Labour Party, the Pound would undoubtedly suffer.
Chart: GBP/USD Weekly Timeframe (September 2013 – September 2017)
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