Summary: UK politics, Fed rate decision, US GDP and PCE data will be the focus of GBP traders.
From tonight, Liz Truss and Rishi Sunak, the two candidates for the next UK prime minister, will take part in a series of televised debates that will largely determine who becomes Downing Street The new owner of number 10. Current opinion polls show Foreign Secretary Truss ahead of the former Chancellor of the Exchequer.
While UK politics is likely to grab the headlines this week and affect GBP, a series of heavyweight US data and events this week could be the driving force behind GBP/USD. The most prominent event was the FOMC meeting in the early hours of Thursday, where the Fed is expected to raise interest rates by 75 basis points. The latest market pricing showed a 76.3% chance of a 75 basis point hike and a 23.7% chance of a 100 basis point hike. Additionally, preliminary U.S. second-quarter GDP (growth is likely to be negative) due in the U.S. session on Thursday and core PCE inflation on Friday will give traders a better idea of the state of the U.S. economy.
GBP/USD daily chart
GBP/USD started the new week with rather subdued trading on either side of 1.2000. A breakout of 1.2064 would see the pair trade at its best level in nearly three weeks; on the other hand, there is little support to stop the pair apart from the 20-day simple moving average (currently at 1.1968) The pair fell below 1.1900. Right now, the pair looks indecisive, maybe other markets have better trading opportunities.
GBP/USD IG Client Sentiment
Nearly 75.75% of clients are net long, and the ratio of net longs to net shorts is 3.12:1. Net longs rose 1.39% from yesterday and fell 7.87% from last week. The number of net short positions decreased by 3.52% from yesterday and increased by 2.27% from last week. The IG sentiment index is often used as a contrarian indicator, with most retail investors being net long suggesting that GBP/USD may fall. However, net long positions increased from yesterday but decreased from last week. Combined with the current retail sentiment and the latest changes in positions, the outlook for GBP/USD is even more unclear.
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