GBP/USD Slumps Through $1.30 As Rate Cut Imminent
Fiona Cincotta January 15, 2020 6:03 AM
Inflation misses forecast boosting rate cut expectations
Despite kicking off today’s session on the front foot, the pound has fallen back through $1.30 following weak UK inflation data.
CPI December +1.3% vs +1.5% exp. (yoy) and 1.5% in November
CPI December 0% vs +0.2% exp. (mom) and 0.2% in November
Core CPI December +1.4% vs +1.7% (yoy) and 1.7% in November
Data showed that the economic picture in the UK continues to deteriorate ahead of Brexit later this month. With inflation at a three-year low and the UK economy contracting by -0.3% in November, there really is very little for pound traders to cheer right now. The soft readings come just days after BoE Governor Mark Carney gave the biggest hint yet that the central bank is considering loosening monetary policy.
There are already two dissenters on the MPC, when you factor in the dismal data and the uncertain outlook over the UK’s future relationship with the EU, a more dovish bias from the BoE is looking pretty certain and a rate cut imminent.
In a speech earlier today, Michael Saunders added to dovish rhetoric from Carney, Vileghe and Tenreyo. He said that it would be appropriate to maintain an expansionary policy stance and possibly cut rates further.
Levels to watch
In reflection of lower interest rate expectations GBP/USD dropped 30 points following the release, slipping through.
GBP/USD is trading below its 50, 100 and 200 sma on the 4-hour chart whilst the RSI is comfortably over 30 and therefore far from oversold conditions. Momentum is to the downside and the bears are in control.
Support can be seen at $1.2950, this week’s low, followed by $1.29 the Christmas low and $1.2820.
Immediate resistance is at 1.30 followed by $1.3040 and then $1.31.
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.