The GBP/USD has seen heightened volatility over the last five years, as a series of geopolitical events have worked in combination with a number of different economic issues to create a somewhat uncertain financial picture. The UK economy often sees inflationary pressures in the housing markets, but if we start to see these factors spill over into the consumer goods then it would not be entirely surprising to see changes made at the monetary policy level.
For the UK economy, these can result in rapid changes in foreign exchange valuations against all of the most commonly traded currency pairs. It is also possible to see an impact in the stock market, although this is generally expected to be less consequential in terms of the dominant trends that are ultimately created.
Two of the primary examples here include the include the EUR/GBP and GBP/USD which are used by most of the best forex traders, but it also includes currency pairs like the GBP/JPY, GBP/AUD, and GBP/CHF. This covers a wide portion of the world economy, and so this is an excellent way to express an active view in the financial markets.
In the chart above, we can see the GBP/USD on the weekly chart using efficient fx trading platforms under live forex market conditions. The GBP/USD is currently trading back above the 1.40 level, which is significant because it now puts the psychological resistance barriers at 1.50 now firmly in focus.
What is most critical to understand here is that the downtrend line from 2014 has now been invalidated, and so this really opens the floodgates to more gains as long as inflationary pressures continue to build. This would mean that there is still scope for additional central bank interest rate increases, and something that would come as a surprise to most of the market given the recent suggestions that the Brexit vote could be reversed.
These markets do not like uncertainty, and a revisitation of the entire Brexit debate could throw many growth questions into the equation. Which can be traded using a chart pattern breakout forex trading strategy that allows for the maximum potential for gains while still limiting losses.
The UK economy could have an important year in 2018, as there are many important policy questions that will need to be answered by the BoE. With the British Pound rallying the way that it is, there could be excellent opportunities for forex traders to capitalize in these areas during the next few months.