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British Pound (GBP) Outlook: GBP/USD, EUR/GBP Levels to Watch

By Justin Mcqueen

16:31, 29 November 2022

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In this article:
EUR/USD
EUR/USD
1.08951 USD
-0.00944 -0.860%
EUR/GBP
EUR/GBP
0.89227 USD
0.00388 +0.440%
GBP/USD
GBP/USD
1.22125 USD
-0.01596 -1.290%

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British Pound outlook
British Pound outlook - Photo:Capital.com. Source: GettyImages

BoE Governor Bailey Gives Little Guidance on December Meeting

Little has been discerned regarding the monetary policy outlook from BoE Governor Bailey’s testimony to the House of Lords. Much of what had been discussed centred around BoE’s handling of the turmoil in the gilt market stemming from the previous government’s mini-budget. The Governor did add that the gilt market is not yet back to normal. That said, looking ahead to the December meeting, the rates market is pricing in 54bps worth of tightening, thus suggesting that BoE’s 75bps rate hike in November was a one-off. 

GBP/USD Fails at 200DMA

GBP/USD: After failing to test its 200DMA the Pound has been oscillating around the 1.2000 handle. This is similar to EUR/USD which has also failed to hold above its 200DMA, which may suggest that USD selling in recent weeks is coming to an end. The key risk event to watch is Chair Powell’s speech. In my view, I lean towards Powell being hawkish, which may lead to renewed strength in the USD across the board. Should this scenario be realised a break below the 200HMA  (1.1960) opens the door towards the support at 1.1770-1.1800. On the flip side, a closing break above the 200DMA (1.2165) raises the risk of a 1.2300 test. 

GBP/USD chart: daily time frame

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GBP/USD

1.22 Price
-1.290% 1D Chg, %
Long position overnight fee -0.0038%
Short position overnight fee 0.0003%
Overnight fee time 22:00 (UTC)
Spread 0.00014

EUR/USD

1.09 Price
-0.860% 1D Chg, %
Long position overnight fee -0.0090%
Short position overnight fee 0.0029%
Overnight fee time 22:00 (UTC)
Spread 0.00007

GBP/JPY

156.97 Price
-1.610% 1D Chg, %
Long position overnight fee 0.0000%
Short position overnight fee -0.0001%
Overnight fee time 22:00 (UTC)
Spread 0.025

AUD/USD

0.71 Price
-1.090% 1D Chg, %
Long position overnight fee -0.0062%
Short position overnight fee 0.0013%
Overnight fee time 22:00 (UTC)
Spread 0.00006
GBP/USD OutlookGBP/USD Outlook - Photo: Capital.com. Source: TradingView

EUR/GBP Sticking to Recent Range

EUR/GBP:  Lower than expected prelim inflation prints from Germany and Spain have somewhat reduced the pressure for the ECB to go ahead with another 75bps at the December meeting. As it stands, money markets are pricing an 85% probability of a 75bps hike. From the technical front, trend indicators signal that EUR/GBP may continue to trade within a 0.85-0.88 range. While the Pound has picked up against the Euro, the 200DMA will likely offer support and thus reaffirm the range trade. Meanwhile, topside resistance in the form of the 200WMA is likely to cap rallies at 0.8688. 

EUR/GBP chart: daily time frame

EUR/GBP OutlookEUR/GBP Outlook - Photo: Capital.com. Source: TradingView

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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