GBP/USD, EUR/GBP and GBP/JPY Outlooks

GBP/USD Prices, Charts, and Analysis

• Little domestic economic data or events next to guide Sterling.
• GBP/USD clients have turned net short.

The British Pound has had a strong week, making multi-week gains against a range of other currencies. The British Pound is up over 2 big figures against the US dollar on the week, over one big figure against the Euro, and by around one-and-a-half big figures against the Japanese Yen. The recent UK inflation report, showing price pressures easing but at a slow rate, has increased expectations that the Bank of England will have to continue hiking interest rates in the short term to help bring inflation back to target. Against this, current market thinking is that the Federal Reserve will likely pause its recent rate hike program this month and that the ECB may temper is program after recent Euro Area data showed inflation easing at a better-than-expected pace. In Japan, the new BoJ governor recently said that monetary policy conditions will remain loose until inflation meets the central bank’s target on a sustainable basis.

Next week’s economic calendar is light of any domestic, market-moving economic data or events, while the global calendar is also relatively thin of high-impact events.

For all market-moving events and data releases see the real-time DailyFX Calendar

Cable is back above 1.2500 after briefly flirting with 1.2300 at the end of last week and the technical setup looks positive. While this week’s rally has pushed the pair into overbought territory, GBP/USD is currently above all three simple moving averages for the first time since mid-May. The overbought signal may slow down any move higher, but a pushback through 1.2547 may see cable testing May’s multi-month high in the coming weeks.

GBP/USD Daily Price Chart – June 2, 2023

The move lower in EUR/GBP is slightly more striking than cable’s move with the recent sell-off showing an unbroken series of red candles. The pair trade below all three simple moving averages with both the 20- and 50-dmas crossing below the longer-dated 200-dma. Support may come into play shortly at 0.8549.

EUR/GBP Daily Price Chart – June 2, 2023

GBP/JPY has been in a fairly unbroken uptrend since late March and today traded at its highest level since February 2016. With the Bank of Japan continuing to keep monetary policy loose, further gains in the pair may be seen in the weeks ahead. The chart is positive with 175 and 177 attainable levels. Care should be taken over commentary from the BoJ as they have a track record of verbal intervention when the Yen weakens excessively.

GBP/JPY Daily Price Chart – June 2, 2023

All Charts via TradingView

GBP/USD Retail Traders are Now Net-Short

Retail trader data show 41.24% of traders are net-long with the ratio of traders short to long at 1.42 to 1.The number of traders net-long is 15.91% lower than yesterday and 27.59% lower from last week, while the number of traders net-short is 23.13% higher than yesterday and 41.47% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.