The pound spiked briefly higher in early trade on Wednesday following upbeat CPI reading, however was unable to hold its gains. Whilst UK inflation declined -0.3% mom (vs. -0.4% exp) on an annual basis prices increased a better than expected 1.8%, up from December's 1.3%. This was the first time that inflation has risen in 6 months
This is still below the BoE 2% target, however the central bank will have no reason to lower interest rates at its next meeting. The upbeat inflation data comes following encouraging signals from the UK labour market, where wages topped pre-financial crisis levels in the three months to December. The British economy also grew by more than analysts had forecast and UK house prices increased by 2.2% vs 1.7% the previous year. The UK economy is starting to show signs of recovery after Brexit uncertainty dragged across the previous year.
Brexit
Any gains in the pound, however, will continue to be capped or eroded by Brexit trade deal fears. As a reminder, Michel Barnier has rejected UK demands for a Canada style deal. The UK has also rejected any role of the ECJ in the future trading relationship. As the two sides have toughened their stance ahead of the March start date for talks, fears of no trade deal being agreed are rising.
Dollar steady ahead of Fed minutes
The dollar is holding steady versus its major peers in early trade. The greenback has been supported by safe haven flows in recent sessions, as anxieties surrounding the impact coronavirus could have on the global economy increase.
Apple warned that it may miss its revenue target as coronavirus was affecting both supply and demand of iPhones in China. German ZEW investor confidence survey also highlighted concerns over coronavirus impacting exporters.
Today attention will turn to the release of the minutes from the Federal Reserve monetary policy meeting. Not much happened at the meeting. Federal Reserve Chairman Jerome Powell didn't say anything new and no action was taken. As a result, investors are not expecting to see any major signals in the minutes.
Levels to watch
GBPUSD slipped below the key psychological level of $1.30. It trades below its 200 & 100 sma and is just testing its 50 sma around $1.2980 on the 4 hour chart.
Immediate support can be seen at $1.2980 (50 sma) prior to $1.2950 (low 13th Feb) $1.2865 (low 10th Feb).
Resistance is seen at $1.3050 (18 Feb high &200 sma) before $1.3085 trend line resistance prior to $1.32 (high 13th Feb).
CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed
Recommended Content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price holds strength ahead of US core PCE inflation
Gold price holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core PCE Price Index data for February, which will be published on Friday.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.