- GBP/USD: supported by UK retail sales, but that is not enough to shake of the bears.
- GBP/USD: bulls capped by the 100-hr SMA, but if that were to give, opens risk towards key 1.3450 (50-W SMA).
While there have been no sound bites from Carney who is due to be speaking now at the Society of Professional Economists' annual dinner, in London, GBP/USD is currently capped by the descending 100-hr SMA, although traders are buying the dip at the ascending 21-hr SMA at 1.3374 currently, making for tightly contained ranges. At the time of writing, GBP/USD is trading at 1.3387, with a high of 1.3422 and a low of 13349.
GBP/USD ran up to the 100-hr SMA on the release of better than expected UK retail sales data for April, (+1.6% M/M versus +0.5% expected). This event garnered extra attention from traders, waiting to scrutinise the numbers considering how of the mark the UK's economic performance has been in comparison to the BoE's projections.
- FOMC minutes secure market's expectations for a June rate hike of 25bps
As a result, the pound has succumbed to a bearish outlook given the setbacks the Q1 data performances have had for the BoE's path to normalisation of monetary policy. Indeed, many would argue that the value of the pound after the Brexit vote had gone a long way to creating the inflationary headwinds, encouraging a hawkish stance from within the MPC previously. However, at this stage, the data has not stacked up and best for a rate hike from the BoE in the immediate future have been swiped off the table, (odds of an Aug rate hike from the BoE more or less unchanged and still less than 50%).
Political headwinds
Earlier in the week, 22nd May, The Bank of England Governor Mark Carney, Deputy Governor Dave Ramsden and members of the Monetary Policy Committee Gertjan Vlieghe & Michael Saunders, had all been testifying on inflation and the economic outlook before Parliament's Treasury Committee. While there was plenty to go through, one of the sentiments from MPC members that stood out was that headwinds from Brexit will eventually fade, according to the MPC member Vlieghe.
However, analysts at Scotiabank argued that market sentiment is facing the additional hurdle of an early June parliamentary vote on the EU Withdrawal Bill that was heavily challenged in the Lords recently. The BBC recently reported that the "cross-party Brexit committee said "absolute clarity" was needed on customs before the transition begins so the UK's withdrawal agreement can be ratified by MPs and MEPs." In the same article, it wrote, "It also warned that removing customs checks was "not the only challenge that must be resolved in order to secure frictionless trade", with large parts of trade also regulated through the EU's single market, which the UK is also leaving."
However, the main focus for traders at the moment stays with the divergence between the Fed and BoE. The FOMC minutes yesterday laid down the foundations for a rate hike as soon as next month, while it is evident that the BoE is on hold for the foreseeable future and one positive from today's retail sales data is not going to change that.
"With consumer’s remaining cautious and borrowing appearing to have fallen substantially, a rate hike over the next few months is certainly not a done deal. As we heard from the BoE’s Vlieghe yesterday, the cost of waiting is not particularly high,"
analysts at ING explained.
GBP/USD levels
The technical readings lean bearish and are stacked up against the bulls. However, 1.3301 comes as the Dec 14 low and a potentially strong level of support. 1.3040 is a key downside target as the Nov 3 low. On the upside, a break of the 100-hr SMA at 1.3410 eyes for a test of 1.3450 (50-W SMA) and that would open the scope towards the 10-D SMA at 1.3478. The convergence of the 200/10-D SMAs (1.3550) comes as the upside target thereafter. The 1.3708 level at the 50% Fib of 1.3040-1.4377 remains compelling on the wide.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.