GBP/USD: Sterling extends gains to 1.3100 as Trump talks Fed down
Sterling is trading up 0.6% at around 1.3090s against the US Dollar, but the gains are rather US Dollar weakness related as a recent streak of the fundamentals including inflation and slumping retail sales derailed prospects of the Bank of England hiking rate in August.
"China, the EU, and others have been manipulating their currencies and rates lower, while the U.S. is raising rates while the dollar gets stronger," US President wrote on his Twitter on Friday with markets taking this as a verbal intervention against the Us Dollar.
1. Technical Overview
Technically, the oscillators turned lower on GBP/USD 1-hour chart with Momentum sliding lower and the Relative Strength Index escaping from the oversold territory. The sell signal is generated on Slow Stochastics, but the crossover is not in the overbought territory and that lowers the indication’s bar. The GBP/USD is still caped within the downward sloping channel with the next hurdle at around 1.2950 before testing round big figure of 1.2900.
GBP/USD PRICE SENTIMENT
GBP/USD BULLISH PERCENTAGE INDEX
Despite the latest intense setbacks off the 2018 high, the medium to longer-term outlook for this major pair remains constructive. The pullback is pushing to the limits but is still viewed as a correction within the recovery off the +30 year low from 2016.
GBP/USD Pivot points
GBP/USD trading positions
2. Fundamental Overview
Although it is not common for presidents to comment on the monetary policy and the central bank is an independent institution, for the US President Trump nothing is sacred enough to stop him from tweeting or commenting.
President Trump said overnight that while he is stimulating the economy with fiscal easing while the Federal Reserve is impeding growth by raising rates verbally pressing on looser monetary policy and a weaker dollar. The comment saw the US Dollar retreat from its highs across the board.
After falling past 1.3000 level the GBP/USD saw the low of 1.2955 on Thursday as the combination of decelerating core inflation and slumping retail sales in the UK clouded the outlook for the Bank of England hiking the Bank rate in August.
The GBP/USD consolidated around the key psychological level of 1.3000 after Trump’s verbal intervention but feels heavy going forward as it is trapped in the downward sloping channel.
With two weeks before the Bank of England monetary policy meeting coupled with the release of the August Inflation Report and followed by the press conference with Governor Mark Carney, the GBP/USD won’t face any important macro release and chances are of the Monetary Policy Committee remaining conservative in August even after its hawkish turn in June.
GBPUSD FUNDAMENTALS TODAY
3. Latest News & Analysis
Influential Institutions & People for the GBP/USD
The Pound VS Dollar can be seriously affected by news or the decisions taken by two main central banks:
The Bank of England is the central bank of the United Kingdom. Established in 1694 and privately owned in the beginning, the Bank was nationalised in 1946 so now is completely owned by the UK government. BOE's main reason to be is to maintain monetary and financial stability in the country. Some of its other tasks are producing secure bank notes, operating asset purchase facility and keeping the inflation low and stable. The bank is overseen by the Court, named used to reffer the board of directors, and is accountable to Parliament and the public.
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism.
Mark Carney is Governor of the Bank of England and Chairman of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Authority. He joined the Bank on 1 July 2013. Carney was born in Canada in 1965 and graduated from Harvard with a bachelor's degree in Economics in 1988. In Oxford University, he also received a master’s degree and a doctorate both in Ecobomics in 1993 and 1995 respectively. Before becoming the Governor of the BOE, he worked as a Governor of the Bank of Canada (BOC) from February 1st. 2008 until June 3rd. 2013.
Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish.
BOE NEWS & ANALYSIS
ECB NEWS & ANALYSIS
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term originated in the mid-19th century, which makes it one of the oldest currency pairs.
Pound Dollar represents two economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, this pair has been suffering some turbulence due to risk related with the abandonment process from the European Union.
GBPUSD 2017 YEARLY FORECAST
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity of Euro Dollar is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, the EUR/USD is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online.
The USD/JPY (or US Dollar Japanese Yen) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: EUR/USD, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD. Japanese Yen has a low interest rate and is normally used in carry trades. This is the reason why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when referred to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is due to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.