GBP/USD regains traction and approaches 1.3000

GBP/USD rebounds from the 1.2950 region.
The next key resistance level emerges at 1.3000.
Next relevant releases in the UK will be the CPI and Retail Sales.

The sterling has managed to regain some poise on Tuesday and is now lifting GBP/USD to the boundaries of 1.3000 the figure after bottoming out in the 1.2055/50 band, or 2020 lows,

GBP/USD weaker on BoE easing rumours, data

Cable saw its recent decline exacerbated after poor results from the UK docket showed the economy contracted at a monthly 0.3% during November, while the industrial and manufacturing sectors remain well entrenched into the contraction territory.

Adding to the renewed weakness surrounding the quid, BoE’s G.Vlieghe said in past days that he would favour a rate cut should the UK economy keep showing signs of further deterioration. Vlighes’s comments add to the already rising speculations that the ‘Old Lady’ could reduce rates further, as per recent appreciations by Governor Carney and MPC member S.Tenreyro.

In the UK docket, key inflation figures tracked by the CPI are due on Wednesday ahead of Friday’s Retail Sales. Later on the US docket, all the attention will be on the US CPI results for the month of December.

What to look for around GBP

The sterling is expected to remain under pressure in the next months, as economic and political uncertainty are predicted to re-emerge after the Brexit deadline on January 31^st. In fact, further effervescence between the EU and the UK is almost priced in, particularly on the trade front. In addition, speculations that the Bank of England could announce some kind of stimulus (lower interest rates) if the economic outlook deteriorates further later in the year are also seen weighing on the currency for the time being.

GBP/USD levels to consider

As of writing, the pair is advancing 0.02% at 1.2991 and faces initial hurdle at 1.3090 (21-day SMA) seconded by 1.3212 (high Jan.7) and then 1.3284 (high Dec.31 2019). On the flip side, a breakdown of 1.2954 (2020 low Jan.14) would expose 1.2904 (low Dec.24 2019) and finally 1.2749 (100-day SMA).

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