GBP/USD Pound Brushes Of Upbeat Inflation
Fiona Cincotta February 19, 2020 6:10 AM
The pound spiked briefly higher in early trade on Wednesday following upbeat CPI reading, however was unable to hold its gains.
The pound spiked briefly higher in early trade on Wednesday following upbeat CPI reading, however was unable to hold its gains and has slipped back through $1.30. Whilst UK inflation declined -0.3% mom (vs. -0.4% exp) on an annual basis prices increased a better than expected 1.8%, up from December’s 1.3%. This was the first time that inflation has risen in 6 months
Any gains in the pound, however, will continue to be capped or eroded by Brexit trade deal fears. As a reminder, Michel Barnier has rejected UK demands for a Canada style deal. The UK has also rejected any role of the ECJ in the future trading relationship. As the two sides have toughened their stance ahead of the March start date for talks, fears of no trade deal being agreed are rising.
The dollar is holding steady versus its major peers in early trade. The greenback has been supported by safe haven flows in recent sessions, as anxieties surrounding the impact coronavirus could have on the global economy increase.
Levels to watch
GBPUSD slipped below the key psychological level of $1.30. It trades below its 200 & 100 sma and is just testing its 50 sma around $1.2980 on the 4 hour chart.
Immediate support can be seen at $1.2980 (50 sma) prior to $1.2950 (low 13th Feb) $1.2865 (low 10th Feb).
Resistance is seen at $1.3050 (18 Feb high &200 sma) before $1.3085 trend line resistance prior to $1.32 (high 13th Feb).
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