GBP Forecast Bank of England Meeting Outlook for GBP/AUD GBP/NZD
In terms of GBP pairs we have seen plenty of volatility in recent weeks as the market responds to the ongoing trade talks between the EU and the UK and today we have the Bank Of England…
The Bank of England is expected to leave its policies unchanged after increasing its bond-buying program by £150 billion in November. The BOE does not release a quarterly report and will not hold an after-meeting press conference.
One potential negative for sterling would be if the Bank of England were to indicate going forward they would consider cutting rates to below zero for the first time in history. In terms of doing this, it hasn’t worked for Japan, The EU, or Switzerland. We wouldn’t expect them to do so at this moment in time and focus on the vaccine impact on the UK economy and of course the Trade talks between the EU and the UK.
In terms of the economic outlook, a positive for sterling is the UK is expected to be the leading country in terms of moving to vaccinate the population. The UK is expected to vaccinate 50% of the country by March 2021 which of course will help the economy to rebound. While the outlook economically is still uncertain
“A “narrow path” has opened up for the UK and EU to strike a post-Brexit trade deal, the president of the European Commission has said. Ursula von der Leyen said the “next few days are going to be decisive”, with just two weeks left before the UK quits EU trading rules. She said differences over enforcing a deal are “largely being resolved,” but talks over fishing remain “difficult”. (BBC News)
However there has been progress in terms of fishing – the UK has watered down a key demand over fishing rights. The UK dropped a push for fishing vessels operating under the UK flag to be majority British-owned in the future EU sources told Guardian news. Germany’s ambassador to the EU, Michael Clauss, has said a deal by the end of this week as possible. The “end of the year hasn’t come yet, and I think there’s still clearly the possibility of having a deal, maybe by end of this week. There’s at least a chance.” Both sides need a deal and fisheries is a minor point to agree on economically sure it’s a big political issue but it’s unlikely in our view a compromise won’t be reached.
In terms of the GBP, its oversold on the commodity currencies, and two pairs to watch in our view are GBP/AUD and GBP/NZD. In terms of the AUD and NZD, we view them as the most overbought major currencies, and the GBP even after the recent bounce from the lows remains extremely oversold historically. We view the GBP as a buy on an upside breakout or on a dip to support as per the charts below.
Technical Analysis
GBP/NZD DAILY CHART: After a sharp sell off last week on the markets view of a no deal we have seen a rally – We view the GBP as a buy above resistance above 1.9100 with stop protection behind 1.8900 – If we were to sell off through first level support the next level of support is 1.8700 which we would view as a level to key off on strength with a stop behind the spike tail low behind 1.8500 – target on the upside 1.9700.
GBP/AUD DAILY CHART: The GBP has rallied after last week’s move through 1.7500. In terms of an upside break a move above resistance at 1.7900 is bullish for higher prices with a stop behind nearby support at 1.7730. If first level support were to give way the next level is 1.7560 and we would look to key off this level on strength with a stop behind last week’s spike tail low – target on the upside 1.8500.
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