Brexit Briefing: GBP Ignores The Noise, Benefits From Weak USD

The UK media have been full of stories this week about the Brexit timetable, UK access to EU research and development, immigration and the free movement of labor, efforts to lure businesses from London to other EU capitals and the divorce bill.

Yet the British Pound and London stocks have sailed serenely through the noise, affected more by geopolitical tensions, global risk and monetary policy. In particular the Pound, while not generally seen as a haven currency, is being helped by the growing belief that tighter monetary settings in the US and the Euro-Zone are being pushed further and further into the future.

Mario Draghi, the President of the European Central Bank, is unlikely to set out a timetable for tightening policy at his press conference tomorrow after the latest meeting of the ECB’s Governing Council.

Meanwhile, the latest comments from US Federal Reserve officials have been distinctly dovish, benefiting the Pound at the expense of the Dollar.

Chart: GBP/USD One-Hour Timeframe (August 24 – September 6, 2017)

Chart by IG

From a technical perspective, GBPUSD has climbed back above the psychologically important 1.30 level and faces little resistance ahead of the July 18 high at 1.3120, then the August 3 high at 1.3265. EURGBP is easing back, has fallen below 0.92 and has dropped under the two-month support line joining the previous rising lows. Potentially it could decline as far as the four-month support line currently close to 0.90.

Chart: EUR/GBP Daily Timeframe (April 24 – September 6, 2017)

Chart by IG

As for IG Client Sentiment, that is currently sending out a bullish signal for GBPUSD, with 42% of retail traders long and 58% short.

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