The British pound has posted slight gains today. GBP/USD is trading in the European session at 1.2106, up 0.21% on the day.
The economic calendar has been light so far this week. On Capitol Hill, the Biden Administration racked up a badly-needed victory ahead of the mid-terms, passing a domestic spending bill which covers climate change, health costs, and corporate taxes. The bill has the interesting name of the Inflation Reduction Act. It would be great if that meant that US inflation, which hit 9.1% in June, must lower itself or else be in breach of the law, but I doubt that US lawmakers have such capabilities.
We could see a reduction in inflation as soon as Wednesday, with the release of July’s inflation report. Headline CPI is expected to fall to 8.7%, down from 9.1%, while core CPI is forecast to rise to 6.1%, up from 5.9%. If the headline reading is higher than expected, it will put pressure on the Fed to raise rates by 0.75% in September and the dollar should respond with gains. Conversely, a soft reading from the headline or core releases would ease the pressure on the Fed and could send the dollar lower.
BRC sends grim warning despite stronger Retail Sales
In the UK, BRC Retail Sales rebounded with a gain of 1.6% YoY in July, after a 1.3% in June. The BRC noted that despite the positive release, retailers are struggling with falling sales volumes, as inflation has hit 9.1% and is expected to hit double-digits. The BRC added that consumer confidence remains weak and the rise in energy bills in October will worsen the cost of living crisis.
The UK releases GDP for Q2 on Friday, and the markets are braced for a downturn. GDP is expected to slow to 2.8% YoY, down from 8.7% in Q1. On a quarterly basis, GDP is projected at -0.2%, following a 0.8% gain in Q1. If GDP is weaker than expected, a fall in the pound is a strong possibility.
GBP/USD technical
-
GBP/USD is testing resistance at 1.2123. Next, there is resistance at 1.2241.
-
There is support at 1.2061 and 1.1951.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0700 after US data
EUR/USD stays in a consolidation phase below 1.0700 in the early American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold trades on the back foot, manages to hold above $2,300
Gold struggles to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to reverse its direction.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.