We stay bullish on Sterling for the week ahead but caution that ongoing Brexit talks and the Bank of England monetary policy announcement may weigh on GBP. This past week the UK government regained control of the Brexit negotiations, with all the House of Lords amendments defeated in Parliament, although what concessions they gave to the Tory rebels in order to win the votes still remains unclear.
On Thursday the Bank of England is expected to leave all monetary policy levers untouched and the market will then look for clues on future moves from the MPC voting pattern and the subsequent press release. Governor Carney may also give his thoughts on Q2’18 UK GDP after last week’s data looks likely to weigh on second-quarter growth.
Sterling traders should continue to be wary of going long of GBPUSD after this week’s hawkish Fed rate hike and should look at other GBP-pairs for potential bullish set-ups. GBPNZD remains one option along with GBPCAD although both pairs have rallied of their recent lows in the past two weeks. EURGBP also remains on the radar, especially after the ECB-inspired sell-off, but again it may be wise to try and enter bullish GBP set-ups on any set-backs.
