GBP/USD had a great week rising to the highest levels since January as the mood in markets improved. A very busy week awaits the pound: inflation, employment, and retail sales stand out. Here are the key events and an updated technical analysis for GBP/USD.
China and the US traded pleasantries about trade relations, Trump mused about returning to the TPP, and also hope for Brexit talks on trade which begin now all pushed the pair higher. Worries about Syria were ignored. Over the weekend, the US, the UK, and France launched airstrikes against the Assad regime’s chemical weapons but the wider effects may be limited. In the US, the Fed expressed confidence about the economy and inflation reaching its targets while inflation indeed increased to 2.1% on the core. What’s next?Updates:
- Apr 20, 8:52: Is inflation rearing its ugly head? Oil is on fire – MM #178: We start by examining the recent signs of rising inflation in the US, continue with one factor that is on...
- Apr 19, 23:38: GBP/USD: Squeeze Has Some Room To Go On Fading Well-Populated Long Positions – TD: The pound suffered from stagnant wages, weak inflation, falling retail sales, a dovish Carney and worries about the Irish border....
- Apr 18, 21:31: GBP/USD Likely To Break Below 1.40; EUR/GBP Likely Range-bound – TD: The pound received two blows: wage growth remained stagnant at 2.8% y/y and then inflation tumbled to 2.5% y/y, lower...
- Apr 18, 11:19: The inflation-related GBP/USD collapse may have room to run: The Technical Confluences Indicator shows that on its way down, the GBP/USD broke below several important clusters of technical support lines. And...
- Apr 17, 19:00: GBP/USD: Rally Doesn’t Jive With Data; Looking To Play It From Short Side This Week – TD: The pound rallied to 1.4376 and then retreated back. What’s next? Here is their view, courtesy of eFXdata: TD Research...
- Apr 17, 7:38: EUR/GBP: En-Route To 0.84 But 2 Caveats Remain; UK Data Likely GBP Positive This Week – SocGen: The pound has reached the highest levels against the dollar since 2016 and it also makes gains against the euro....
- Apr 16, 23:34: GBP/USD: Last Week’s Rally Mainly Technical Driven; Break Of 1.4345 Key S/T – Danske: The pound advances higher and higher and flirts with the post-Brexit highs. What’s next? Here is their view, courtesy of...
- Apr 16, 18:26: GBP/USD is returning to pre-Brexit levels – lines to watch: The GBP/USD is flirting with levels last seen in 2016, before the EU Referendum. The pair may not run too...
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- Rightmove HPI: Sunday, 23:01. Early in the week, Britain’s earliest House Price Index is out. It last showed a big rise of 1.5% m/m in March. This time, the report for February may be more modest.
- CB Leading Index: Monday, 13:30. The composite index by the Conference Board has remained flat in January. The report for March may show an uptick. Note that most of the seven indicators that make this gauge have already been published.
- Jobs report: Tuesday, 8:30. The last jobs report was quite mixed. Wages rose by 2.8% y/y in January but the Claimant Count Change rose by 9,200 in February, worse than expected. The unemployment rate reverted back to 4.3% in January and that is unlikely to change in the report for February. The focus remains on the wages: the ongoing acceleration in pay implies a growing case for a rate hike in May. A rise to 3% is expected. However, another rise in jobless claims could trigger worries: an increase of 13.3K is forecast.
- Inflation report: Wednesday, 8:30. Britain publishes key data day after day. Inflation slowed down to an annual pace of 2.7% in February, off the edge of the 1-3% range that is mandated by the Bank of England. The same level is expected for March. The stronger pound has pushed prices of imported goods lower. Another slowdown could be seen in the data for March. Core CPI was at 2.4% (2.5% projected now) while the PPI Input fell by 1.1% m/m back then (+0.4% expected now).
- Retail Sales: Thursday, 8:30. After two disappointing months, sales rebounded by 0.8% in February. A drop of 0.5% is projected for March, countering that rise. While the indicator is volatile, consumption is a significant part of the economy in the UK.
- Jon Cunliffe talks, The Deputy Governor of the Bank of England attends the IMF Meetings in Washington and apart from speaking, he will answer audience questions. Cunliffe is usually within the consensus of voters.
- Michael Saunders talks: Friday, 9:30. The external member of the Monetary Policy Committee (MPC) speaks in Glasgow and may reiterate his hawkish views. Saunders voted for a rate hike more than once.
GBP/USD Technical Analysis
Pound/dollar initially batteld with the 1.4150 level (discussed last week) before moving higher and nearing 1.43.
Technical lines from top to bottom:
1.4345 is the January 2018 swing high that is worth watching. 1.4300 capped the pair in mid-April. .
1/4260 was the high point in March and provides another line of defense. 1.4150 capped the pair in mid-February.
1.41 capped the pair in early April and also in mid-March. It is followed by the round level of 1.40, which is eyed by many.
1.3890 served as support in mid-March and maintains its role. 1.3790 was a swing low in mid-March.
I am neutral on GBP/USD
While Brexit negotiations may get stuck at some point, the current optimism will probably be good enough to counter the US Dollar. The greenback does not price in the rise in US inflation.
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