GBP/USD has a turbulent week with the transition deal, mixed data and the BOE nearing a rate hike. Can the pair continue higher? Final GDP and the Current Account stand out. Here are the key events and an updated technical analysis for GBP/USD.
The EU and the UK did not wait for the Summit on Thursday to announce that a transition deal for Brexit has been reached. The British government climbed down on several demands and the question of the Irish border was kicked down the road. Nevertheless, this undoubtedly cheered the pound. Data was mixed with inflation sliding to 2.7% y/y while wages increased to 2.6%. Retail sales shined with a bounce of 0.8% and two members of the BOE surprised by voting for a rate hike already now. The chances of an increase in the interest rate in May have increased. In the US, the Fed raised rates as expected but did not change the outlook for 2018, leaving a total of three hikes. Trump’s tariffs on China caused worries in markets and the US dollar dropped.Updates:
GBP/USD daily graph with resistance and support lines on it. Click to enlarge:
- High Street Lending: Monday, 8:30. This early report from around two-thirds of UK banks precedes the official figure. After two months under 40K, the number of mortgages reached 40.1K in January. The data for February is expected to show a slide back to 39.1K.
- FPC Meeting Minutes: Tuesday, 8:30. The BOE’s Financial Policy Committee releases its minutes from its quarterly meeting and this may reveal what the members think of financial risk and especially expanding credit.
- CBI Realized Sales: Wednesday, 9:00. The Confederation of British Industry’s measure of realized sales disappointed in February with a drop to 8 points, the lowest since October, which was an outlier month. Yet another slide is on the cards now, to 7.
- GfK Consumer Confidence: Wednesday, 23:01. The GfK NOP Consumer Confidence Barometer dropped to -10 points in February, within the recent range. A repeat of the same score is expected for March. The negative numbers represent pessimism among consumers in this 2000-strong survey.
- GDP: Thursday, 8:30. The UK economy grew at a slower pace than many of its peers in 2017. The final quarter saw a growth rate of 0.4% q/q according to the second estimate and the final read is expected to confirm it. While changes to the quarterly growth figures are not common, a change to the annual number happens quite often.
- Current Account: Thursday, 8:30. The UK has a significant Current Account deficit that reached 22.8 billion in Q3 2017. The figure for Q4 2017 may even be worse: 23.7 billion according to the forecasts.
- Net Lending to Individuals: Thursday, 8:30. A higher lending rate implies increased economic activity. The amount squeezed in January to 4.7 billion and a small increase to 4.8 billion is projected now.
- M4 Money Supply: Thursday, 8:30. The amount of money in circulation increased by 1.5% a much higher rate than had been expected. A slightly more moderate increase of 1.3% is on the cards now.
- Mortgage Approvals: Thursday, 8:30. The official measure of mortgage approvals reached 67K in January, more than had been projected and a comeback after a few weak months. A minor slide to 66K is on the cards, similar to the retreat in the High Street Lending measure.
GBP/USD Technical Analysis
Pound/dollar was initially stuck under 1.40 but then made a decisive break to the upside, reaching 1.4220 at the peak before closing around 1.4135.
Technical lines from top to bottom:
1.4345 is the January 2018 swing high that is worth watching. 1.4280 was a top line in early February and it comes next.
1.4220 was a swing high in late March 2018. 1.4150 capped the pair in mid-February.
1.4070 is next, after serving as a swing high in late February. It is followed by the round level of 1.40, which is eyed by many.
1.3935 capped the pair early in March and remains a battle line. 1.3790 was a swing low in mid-March.
1.3765 was the low point in early February. 1.3710 was a low point in early March.
I am neutral on GBP/USD
The pound got its boost from the can-kicking exercise in Brussels and this may see a reversal, but also the US has its troubles with the dovish hike and the trade wars.
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