Top Story

GBP/USD remains supported ahead of key UK data and BoE decision

Equity markets rallied back on Monday and safe-haven demand took a downturn as Hurricane Irma abated and North Korea refrained from conducting more missile tests (for the time being). The US dollar found a bit of footing as it rebounded after having dropped to a multi-year low against a basket of other major currencies late last week. Meanwhile, the British pound managed to stay well-supported in the run-up to a week featuring major economic data releases and a key central bank decision from the UK.

On Tuesday, the UK Consumer Price Index will be released. This key inflation indicator is expected to show a 2.8% increase in prices year-over-year for August, which would be an increase from the previous month’s 2.6%. Wednesday brings UK jobs data that will also impact the pound. And on Thursday, the highly anticipated Bank of England rate decision will take center stage. Though a rate hike is not expected at this time, the BoE has the potential to become more hawkish in-line with other major central banks, especially if the preceding UK inflation and employment data impress. In this event, the pound could get a further boost against the dollar, given the increasingly dovish outlook for US monetary policy via the Fed.

On the US side, this week will also feature key inflation data – Wednesday’s US Producer Price Index for August (+0.3% expected) and Thursday’s Consumer Price Index for August (+0.3% expected) – along with August’s retail sales data (+0.1% expected).

In the run-up to this series of economic releases from both sides of the pond, GBP/USD has been entrenched in a strong rally for most of the past three weeks as the dollar has fallen sharply and the pound has stayed well-supported against its major rivals. The pair has recently risen well above the key 1.3000 psychological level to approach the 1.3267 high reached in early August, before pulling back modestly on Monday’s noted dollar rebound. Amid the key data and central bank decision coming out of the UK this week, GBP/USD has a strong possibility of breaking out to the upside, especially if a potentially more hawkish statement from the Bank of England is viewed in contrast with a more dovish-leaning Fed. In the event of such a breakout above early August’s noted high, the next major upside target is around the key 1.3500 resistance area.

More From James Chen, CMT

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
Or, give a demo account a test drive.