Fundamental
Overview
The USD came under some
renewed pressure following the US CPI report. The data was mostly in line with
forecasts and not strong enough to deter the market from expecting a cut in
September.
In fact, the pricing
actually increased to 60 bps of easing by year-end compared to 57 bps before
the CPI release. This just shows that the market is now very confident on a
September cut and fully prices in at least another one before the end of the
year.
A September cut looks
unavoidable now and only a hot NFP report in September might get us to a 50%
probability, although it would certainly diminish expectations for rate cuts
after the September one. For August, we have now just Fed Chair Powell’s speech
at the Jackson Hole Symposium as the next major event. Traders will be eager to
see if he changes his stance as well.
On the GBP side, the BoE delivered
a hawkish cut last week with the first voting round failing to produce a
majority. It was the first time ever the BoE had to conduct two voting rounds
to reach a majority. Moreover, inflation forecasts were revised upwards, and
the statement leant on the more hawkish side with these two lines: “upside
risks around medium-term inflationary pressures have moved slightly higher” and
“the restrictiveness of monetary policy has fallen.”
The central bank is finally
acknowledging that inflation should be their biggest concern given that the UK
still has one of the highest inflation rates among the major countries. In
fact, core inflation has never fallen below 3% since 2021. Couple that with
high wage growth and a central bank that is cutting rates, and the outlook gets
very tricky for the BoE.
GBPUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that GBPUSD has rallied all the way up to the key swing level at 1.3590.
This is where we can expect the sellers to step in with a defined risk above
the level to position for a drop back into the 1.3368 level. The buyers, on the
other hand, will want to see the price breaking higher to increase the bullish
bets into the 1.38 handle next.
GBPUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor upward trendline defining the bullish momentum on
this timeframe. If we get a pullback, the buyers will likely lean on the
trendline with a defined risk below it to keep pushing into new highs. The
sellers, on the other hand, will look for a break lower to increase the bearish
bets into the 1.3368 level next.
GBPUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much we can add here although on an intraday basis, we have a very tight
range, so a break on either side might trigger a more sustained move. The red
lines define the average daily range for today.
Upcoming Catalysts
Today we get the US PPI and the US Jobless
Claims figures. Tomorrow, we conclude the week with the US Retail Sales and the
University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.