GBP/USD forecast ahead of UK and EU talks on Northern Ireland
- The GBP/USD pair has held steady in the past few weeks.
- Focus will be on the UK and EU talks on Northern Ireland.
- The pair will also react to the upcoming US inflation data.
The GBP/USD price is holding steady ahead of the upcoming Brexit talks between Lizz Truss and Maros Sefcovic. The pair is trading at 1.3600, also as investors wait for an important testimony by Jerome Powell and the upcoming US consumer inflation data.
Brexit talks ahead
One of the top themes that will affect the GBP/USD pair will be the upcoming Brexit talks between the UK and the European Union. This week’s talks will be about Northern Ireland, a place that has become a thorn in the flesh between the two sides.
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The UK argues that the deal it signed with the European Union in 2019 is unsustainable and that it needs significant reshaping. The protocol left Northern Ireland in the EU single market for goods to avoid bringing a hard border on the Republic of Ireland. The latter is a member of the European Union.
Therefore, the UK argues that the creation of a trade border on the Irish Sea divides the UK’s internal markets. As a result, it is affecting business people in Great Britain.
Another problem is that the UK wants to remove the European Court of Justice as the final arbiter of future disputes on issues.
On the other hand, the EU wants to have oversight on what is going on in Northern Ireland if the place remains in the single market for goods. If there is no agreement, the UK will trigger Article 16, which is safeguarding the protocol. Doing that would have a bearish impact on the GBP/USD pair.
The next key catalysts for the GBP/USD pair will be the upcoming US consumer inflation data that will come out on Wednesday. Analysts expect the data to show that the headline CPI jumped to 7% in December. The Fed Chair will also testify about Fed’s plans on Wednesday.
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. The pair has managed to move above the 25-day moving average and is between the ascending channel shown in blue.
It is also slightly below the key support at 1.3600, which was the highest level on November 9th. Therefore, the GBPUSD pair will likely keep rising as bulls target the key resistance at 1.3650.
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