GBPUSD continues to bear the burden of hard Brexit fears after recording the largest declines in 13 months. Discussions over Scotland’s departure from the United Kingdom and the bold actions of the British Prime Minister keep the pair under pressure. USD offer additional weakness for the pair, the UK’s CPI in the spotlight. Here is the GBPUSD Fundamental Analysis of 18 December, 2019.
18 December, 2019 | AtoZ Markets – After falling the most sharply in 13 months, the GBPUSD pair remains under pressure around 1.3100 as it heads towards open the London open on Wednesday. The pair fears a hard Brexit while the recent strength of the dollar has added concerns for buyers.
GBPUSD Fundamental Analysis – 18 December 2019
Prime Minister Boris Johnson remains on the right track regarding his “do or die” for Brexit. Conservative leader ready to introduce bill to block the European Union (EU) transition beyond 2020. However, regional leaders are sceptical of agreeing on short-term deals and increase the chances of a no-deal Brexit.
Also supporting the argument is the UK PM Johnson’s latest actions, including the ban to Davos, as well as concerns over the departure of Scotland from the United Kingdom, as noted Scottish Prime Minister Nicola Sturgeon via the BBC.
On the other hand, the United States dollar (USD) benefited from the increase in industrial production and real estate market figures, not to mention the positive comments from the Federal Reserve (Fed) officials. The greenback also benefited from positive statements by Treasury Secretary Steve Mnuchin and Commerce Representative Robert Lighthizer.
UK CPI and US Economic Outlook
Looking ahead, GBPUSD traders will mainly focus on November’s inflation data, while Fedspeak may offer additional indexes. In this regard, TD Securities said:
“We expect the CPI to fall slightly to 1.4% y/y in November (market 1.5%). We, therefore, expect the core CPI held at 1.7% year-on-year (1.6% on the market) for the third consecutive month. Black Friday occurred so late in the month this year; we suspect that the discount will not have been fully captured.”
The US dollar index edged up 0.1% to 96.873. Overnight, Dallas Fed President Robert Kaplan reiterated that interest rates would be kept on hold unless the US economic outlook changes significantly. Mr. Kaplan said:
“I have already integrated my outlook; we are going to have a weak manufacturing sector next year, sluggish global growth, rather sluggish business investment, but with a strong consumer.”
“I was concerned that weak business and manufacturing investment would spill over into other sectors of the economy. We haven’t seen it yet. We have a very tight job market, and there is no evidence that the job market is doing nothing but tightening. This is a perfect tailwind for the consumer. So unless something change that causes the employment picture to change, the consumer will be solid for next year.”
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