Top Story

US CPI Eyed: GBP/USD to 1.2815?

Pound rallies as wages unexpectedly rise
The pound was experiencing a rare up day, rebounding from a 4-month low as investors reacted to the better than expected employment data. UK unemployment held steady at a 44-year low whilst UK average wages unexpectedly jumped in the three months to April. Wages increased 3.4%, higher than the 3.3% previously and significantly above the 3.1% forecast.

The labour market continues to show resilience in the face of Brexit uncertainty and ongoing trade tension. Whilst a strong labour force is often considered a sign of a healthy economy, the data is slightly misleading in current circumstances. Rather than strong employment figures depicting a robust economy, what we are actually seeing is evidence of firms preferring to hire rather than commit to investment. It is, after all, easier and quicker to fire staff than unwind an expensive investment.

Political uncertainty is expected to keep a lid on any moves higher. The Tory leadership battle has officially started, with the 10 candidates confirmed. The candidates are a mix between those that are willing to deliver a hard Brexit and those that are looking for more concessions from the European Union. The only candidate to fail to win enough support was Sam Gyimah, supporter of a second referendum. Th first ballot takes place on Thursday. A strong showing for hard-line Brexiteers could hit the pound, meaning any move hiher could be short lived.

US PPI hit dollar ahead of Wednesday’s CPI 
Improved sentiment on the trade front and worse than forecast PPI data from the US hit demand for the dollar. Inflation at wholesale level dropping to 1.8% doesn’t bode well for future consumer inflation and only served to reinforce expectations that the Fed will be cutting interest rates, possibly as soon as the July meeting. 
The market is currently pricing in a 78% probability of a rat cut in July and a 92% chance of a cut in September.
Traders will now turn their attention to US CPI data on Wednesday. Expectations are for consumer inflation to drop to 1.9% yoy from 2.1% in April. Weaker data could boost expectations of a rate cut further and drag the dollar lower.

GBP/USD Levels to watch:
GBP/USD uptrend is marginally positive as it trades above 50 and 100 sma, but below 200 sma. Support can be seen at $1.2685 prior to $1.2640 and $1.2605. On the upside resistance $1.2750, $1.2763 and $1.2815.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account