GBP/USD – Brexit angst sends pound to 4.5 month low

GBP/USD continues to lose ground this week. Currently, the pair is trading at 1.2647, down 0.45% on the day. The pound touched a low of 1.2641 earlier on Wednesday, its lowest level since early January. On the release front, British CPI jumped to 2.1% in April, up from 1.9% in March. Still, this missed the estimate of 2.2%. The U.K. deficit jumped to GBP 5.0 billion, shy of the estimate of GBP 5.2 billion. This marked a 5-month high. Today’s highlight is the minutes of the Federal Reserve’s policy meeting earlier in May. On Thursday, the U.S. releases unemployment claims.

Prime Minister May will try (yet again) to push a withdrawal agreement through parliament in early June. The first three attempts were shot down by lawmakers, and it’s doubtful if the fourth attempt will be successful. May has said that this deal will include a compromise on the customs union issue, but Labor and many Conservative MPs have dismissed May’s proposal. May’s days in the prime minister chair may be numbered, as  she desperately tries to prevent the U.K. from crashing out of the EU without a deal in place.

At the May policy meeting, the Federal Reserve maintained the benchmark rate for a fourth straight month. The rate statement noted that inflation pressures remain muted and that the FOMC would remain patient regarding future rate movements. Jerome Powell reinforced this stance after the meeting, saying that “we don’t see a strong case for moving in either direction”. Will the minutes point to any bias regarding the next rate move? The Fed is already on record as saying it does not expect to raise rates before 2020, and with inflation levels persistently below the Fed’s target of 2.0%, the Fed can afford to continue its wait-and-see stance.

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False dawns

GBP/USD Fundamentals

Wednesday (May 22)

• 1:00 US FOMC Member Bullard Speaks

• 4:30 British CPI. Estimate 2.2%. Actual 2.1%

• 4:30 British PPI Input. Estimate 1.1%. Actual 1.1%

• 4:30 British Public Sector Net Borrowing. Estimate 5.2B. Actual 5.0B

• 4:30 British Core CPI. Estimate 1.9%. Actual 1.8%

• 4:30 British HPI. Estimate 0.9%. Actual 1.4%

• 4:30 British PPI Output. Estimate 0.3%. Actual 0.3%

• 4:30 British RPI. Estimate 2.8%. Actual 3.0%

• 10:00 US FOMC Member Williams Speaks

• 10:30 US Crude Oil Inventories. Estimate -1.2M

• 14:00 US FOMC Meeting Minutes

Thursday (May 23)

• Day 1 – European Parliamentary Elections

• 8:30 US Unemployment Claims. Estimate 215K

Open: 1.2705 High: 1.2719 Low: 1.2641 Close: 1.2647

GBP/USD Technical

GBP/USD was mostly flat in the Asian session and edged lower in European trade. The pair is steady in the North American session

• 1.2615 is providing support

• 1.2723 is the weak resistance line

• Current range: 1.2615 to 1.2723

Further levels in both directions:

• Below: 1.2615, 1.2477 and 1.2401

• Above: 1.2723, 1.2841, 1.2910 and 1.3000