GBP/USD steady ahead of BOE, Brexit, UK-Japan, and UK-US trade talks
- The GBP/USD had its best month in more than a decade in July.
- Focus now shifts to the BOE interest rate decision that will come out on Thursday.
- The pair will also react to post-Brexit talks with the US, EU, and Japan.
The British pound enters August being in the offensive. The GBP/USD pair spiked by more than 5.5% in July, its best month in more than a decade. The British pound index, on the other hand, rose by more than 5%.
BOE interest rate decision eyed
The biggest pound-related news this week will be on the BOE interest rate decision that will happen on Thursday. This meeting comes at a time when the number of coronavirus cases in the UK has been falling.
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The meeting also comes a month after the bank decided to increase its quantitative easing program by £200 billion.
Therefore, the central bank will be under no pressure to hike or lower rates or even make any further decision. Still, analysts will be waiting for direction from Andrew Bailey, the BOE Governor. Among the key issues they will be waiting for are on negative interest rates and yield curve control.
Analysts have divided opinion about the impact of negative rates. Some credit it for the current resurgence of the Eurozone economy while others believe it would have negative implications for the UK economy. In a recent opinion, a Bloomberg analyst cited the big financial sector in the UK.
Tough negotiations ahead
The GBP/USD will also react to a series of tough negotiations in the coming weeks. The most prominent is the Brexit talks that will restart later this month. In these talks, the UK is trying to secure a trade deal with the EU, its biggest trading partner. The stakes of these talks to nowhereis high because of the divergencies between the UK and the EU.
The sixth round of talks will start on August 17 and end on 21st. In the following week, the chief negotiators will meet to iron out key issues. The seventh round of talks will then start on September ahead of the extraordinary meeting of EU leaders in Germany. All these talks will culminate to an EU leaders in October and another one in December. If there will be no deal by December 31st, the UK will default to trading on WTO terms.
Meanwhile, the UK is still negotiating with the US and Japan. According to Bloomberg, the two sides that do more than £39.5 billion worth of trade, are close to an agreement. The UK department of international said:
“Both sides are committed to an ambitious timeline to secure a deal that will enter into force by the end of 2020 if at all possible.”
Similarly, the country is accelerating its trade talks with the US. Indeed, Liz Truss, the UK trade secretary will meet with her American counterparts this week to try and hammer a deal. Still, this deal faces significant challenges because of key issues like the NHS.
GBP/USD technical forecast
The daily chart below shows that the GBP/USD pair has been in a strong upward trend in the past few weeks. The price has moved close to the 61.8% Fibonacci retracement level. It is also slightly above the 50-day and 100-day exponential moving averages. Therefore, the upward trend is likely to continue as bulls target the next resistance at 1.3290.