GBP/USD – British pound steady, markets await bank stress tests, BoE stability report

GBP/USD has ticked higher in the Wednesday session. In North American trade, the pair is trading at 1.2759, up 0.11% on the day. On the release front, the BoE released its financial stability report. In the U.S, the key event was Preliminary GDP, which gained 3.5% in Q3, just shy of the estimate of 3.6%. This follows an identical gain of 3.5% in the Advanced GDP release in October. On Thursday, the U.K releases Net Lending to Individuals as well as GfK Consumer Confidence. There are three key releases in the U.S. – Core PCE Price Index, personal spending and unemployment claims. As well, the FOMC releases the minutes of its November policy meeting.

With no British data events on the schedule, the markets will be paying close attention to the British bank stress tests and the BoE financial stability report. Both items will likely receive more attention than usual, given the proximity to Brexit, as parliament is set to vote on the historic withdrawal agreement in two weeks time. There is a great deal of uncertainty over cross-border financial services, once Britain leaves the European Union. What is painfully clear is that the City of London, which has laid claim to being the financial capital of Europe, will see a downturn as many banks and financial institutions move their offices from London to the continent. If the stress tests and the BoE stability report point to weaknesses in the banking sector, the pound could respond with losses.

With the U.S and China trading salvos in their trade war, the markets will be hoping for some good news the G-20 summit in Argentina, which begins on Friday. Analysts aren’t particularly interested in the agenda of the summit, which is likely to be overshadowed by a meeting on the sidelines between President Trump and Chinese President Xi Jimping. The stakes are high, as the tariff spat between the two economic giants threatens to dampen global growth. Will we see a thaw in the tariff spat, or will Trump and Xi take shots at each other’s policies? Trump has threatened to raise tariffs on Chinese products from 10 percent to 25 percent, but this could be grandstanding ahead of the summit. Trump has always preached ‘the art of the deal’, and the markets are hoping that cooler heads will prevail and the U.S. and China can reach some kind of agreement.

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GBP/USD Fundamentals

Wednesday (November 28)

• 8:30 US Preliminary GDP. Estimate 3.6%. Actual 3.5%
• 8:30 US Goods Trade Balance. Estimate -76.7B. Actual -77.2B
• 8:30 US Preliminary GDP Price Index. Estimate 1.7%. Actual 1.7%
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.5%. Actual 0.7%
• 10:00 US New Home Sales. Estimate 583K. Actual 544K
• 10:00 US Richmond Manufacturing Index. Estimate 16. Actual 14
• 10:30 US Crude Oil Inventories. Estimate 0.6M
• 11:30 British Bank Stress Test Results
• 11:30 BoE Financial Stability Report
• 12:00 US Fed Chair Powell Speaks

Thursday (November 29)

• 4:30 British Net Lending to Individuals. Estimate 4.5B
• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.4%
• 8:30 US Unemployment Claims. Estimate 221K
• 10:00 US Pending Home Sales. Estimate 0.8%
• 14:00 US FOMC Meeting Minutes
• 19:01 British GfK Consumer Confidence. Estimate -11

*All release times are EST

*Key events are in bold

GBP/USD for Wednesday, November 28, 2018

GBP/USD November 28 at 11:35 EST

Open: 1.2746 High: 1.2805 Low: 1.2733 Close: 1.2746

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair posted considerable gains in European trade but has given up these gains in the North American session

• 1.2706 is providing support
• 1.2812 is the next resistance line
• Current range: 1.2706 to 1.2812

Further levels in both directions:

• Below: 1.2706, 1.2589 and 1.2488
• Above: 1.2812, 1.2915, 1.3048 and 1.3173

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