GBP/USD pulls back ahead of final UK Q3 GDP data

  • The GBP / USD pulled back as traders waited for the final reading of the UK third quarter GDP data.

  • Analysts expect the data to confirm that the UK economy fell sharply in the third quarter.

  • The couple are also reacting to the single market bill going to the House of Lords

GBP / USD is down for the first time in five days, largely due to a stronger US dollar. The pair are also reacting to ongoing developments on Brexit and the internal market bill. It trades at 1.2840, below this week's high of 1.2934.

GBP / USD pulls back ahead of GDP data

Internal market accounts

In August, Boris Johnson unveiled the Internal Market Act, which would violate international law in the course of the Brexit talks. The law was passed shortly thereafter in the first phase of legislation. And yesterday it completed the final stage in the House of Commons by 84 votes ahead. 340 members voted in favor, 256 against.

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The bill is now expected to be moved to the House of Lords, where most analysts believe it will fail. That's because Tories don't have a majority in this House.

According to BloombergBoris Johnson officials expect the Lords to either rewrite or remove most parts of the bill. As a result, an important negotiating chip for the Prime Minister will be removed while talks continue in Brussels.

While key questions about trade between the European Union and the UK remain, analysts are optimistic that both sides will make some progress on Brexit this week. If so, they will enter a phase of further negotiations before the unofficial deadline of October 15 to iron out important issues.

UK GDP data ahead

Today, GBP / USD is likely to react slightly to the country's final second quarter GDP measurement. This is because the readings will be close to what the Office for National Statistics (ONS) published in August. The figure showed the UK economy contracted 20.4% in the quarter after falling 2.2% in the first quarter. This then resulted in an annualized decline of 21.7%.

The pair is also reacting to real estate price index (HPI) data. Analysts polled by Reuters expect the data to show prices rose 0.5% in September, after rising 2.0% the previous month. This increases the prices by 4.5% on an annual basis.

Just yesterday, data from the Bank of England showed that the mortgage industry continued to perform well in August. The data showed that August mortgage approvals hit a record 84.70,000. That was significantly higher than the 73,000 analysts expected. As a result, mortgage lending rose to more than £ 3.1 billion.

Technical outlook GBP / USD

GBP / USD technical chart

The daily chart shows that the GBP / USD has risen for the last four consecutive days. It has risen from 1.2647 last week's low to 1.2935 Monday's high. The price is between 61.8% and 78.6% Fibonacci retracement levels. It's also slightly below the 25-day exponential moving average. Hence, I suspect that despite recent gains, the pair will remain in a downtrend unless it moves above this moving average which acts as dynamic resistance.

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