GBP/USD: trapped between rate hikes and Brexit woes

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3858

GBP/USD neutral short-term needs to regain 1.3920 to look constructive.
Chances of a BOE rate hike offset by Brexit jitters.

The GBP/USD pair trades uneventfully within Tuesday's range, marginally lower ahead of Wall Street's opening as the dollar recovers from late Tuesday/early Wednesday's slump. Investors have been on their toes ever since the US January Nonfarm Payroll report showed a large jump in wages' growth, a sign of increasing inflationary pressures in the country. Fears that inflation will finally pick up, and strongly, triggered will rides all through financial markets, with Wall Street losing over 10% from its record highs, and swings of over 20 basis points in Treasury yields. At the same time, UK inflation remained too high in January, and given the BOE's latest statement, chances of a rate hike in May in the UK have increased. Brexit woes, however, undermined the Pound.

The pair is stable around 1.3860 ahead of US inflation data release, which in spite of not being Fed's favorite measure, could anyway fuel fears, or brought relief. Any case seems action is granted for today. Technically, the 4 hours chart presents a neutral stance ahead of the event, as the price is a few pips above its 20 SMA and 200 EMA, both converging at 1.3850, while technical indicators lack directional strength, stuck around their mid-lines. The pair would need to settle above 1.3920 to be able to gain further bullish traction, although limited by the 1.4000 threshold.

Support levels: 1.3845 1.3800 1.3760

Resistance levels: 1.3885 1.3920 1.3950

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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