GBP/USD consolidates in an upside correction of the 2020 sell-off
|- GBP/USD holds in the 1030 handle after US/China trade deal announcements and signing ceremony.
- UK and US data disappointing of late.
GBP/USD is consolidating above a 38.2% Fibonacci retracement of the Sep-Nov lows and highs in the 1.30 handle, somewhat supported by the 50-day moving average, weighed by UK monetary policy outlook and Brexit uncertainties.
At the time of writing, GBP/USD is trading at 1.3022 having risen in a range of between 1.2984 and 1.3042 following the signing of the US-China trade deal. While there was a bid in US stocks, yet again marking all-time highs, the price action elsewhere could be telling. Oil prices eased as global trade is not expected to pick up considering most tariffs remain in place despite the trade deal being reached.
"The deal includes some reduction in tariffs on Chinese imports but most tariffs will remain in place until the next phase of the deal is agreed. It also includes China agreeing to buy $40 billion worth of US agricultural goods which is a large step up from the $24 billion supplied in 2017," analysts at ANZ bank explained, adding:
"To achieve this figure the US would need to supply 80% of China’s soybean requirements which is a tall order given how competitive Brazilian soybeans are. More pork is also expected to be supplied from the US which could take the edge of the excessively high meat prices currently prevailing in China."
Economic data in focus
Meanwhile, GBP has been whipsawed around on recent weak UK data of late, which is encouraging expectations of a BoE rate in June although the market doesn’t want to get overly bearish GBP as the price remains in the recovery of the recent lows down in the 1.2950s.
As for the US dollar, we have seen additional data this week following the slight disappointment in the US Consumer Price Index. On Wednesday, the US released the Producer Price Index numbers that came out for December which too was weaker than expected due to softness in the service sector offsetting higher priced goods. "December data came in at just 0.1% − below expectations of 0.2% − bringing the annual inflation rate for 2019 to 1.3%. Inflation remains well below the Fed target of 2% but San Francisco Fed Reserve President Mary Daly said the three rate cuts last year does put the economy on track to reach that target," the analysts at ANZ Bank explained.
GBP/USD levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.