GBP/USD rises amid risk-on mood & after solid data on Friday
GBP/USD is rising, boosted by the upbeat market mood and stronger-than-expected data on Friday.
US-China trade deal optimism is boosting risk sentiment on Monday, pulling the USD lower. President Trump and his Chinese counterpart, Xi Jinping, will meet this week, where they are expected to agree on a deal.
The USD is also under pressure on expectations that the Fed will cut interest rates this week following cooler-than-forecast CPI data on Friday.
US CPI rose to 3% YoY, up from 2.9% but below the 3.1% forecast. Core CPI unexpectedly fell to 3% from 3.1%.
Meanwhile, the pound continues to benefit from stronger-than-expected retail sales and PMI data on Friday. According to data from the Office for National Statistics, retail sales rose by more than 0.5% on a monthly basis, up from the 0.2% forecast.
UK private sector business activity also expanded at a faster pace, thanks to a rebound in the manufacturing sector. Manufacturing PMI unexpectedly rose to 49.6, up from 46.6, while the overall composite PMI rose to 51.1. Although the report also showed that jobs continued to be cut amid fading business confidence ahead of the November budget.
GBP/USD forecast – technical analysis
GBP/USD faced rejection at the 50 SMA and then rebounded lower before finding support on its near-term falling trendline.
Buyers are attempting to stage a recovery, but this needs to rise above 1.3350, the near-term resistance, to expose the 50 SMA once more at 1.3465. A rise above here creates a higher high, bringing 1.36 into play.
On the downside, a break below the support trendline at 1.3290, last week’s low, exposes the 200 SMA at 1.3230. Below here 1.3150 comes into focus.
DAX rises ahead of a busy week with FOMC, ECB rate decisions & earnings
The DAX, together with its European peers, is advancing on Monday, boosted by easing trade tensions between the US and China, which lifted risk sentiment.
U.S. President Trump said the US and China are set to reach a trade deal when he meets his Chinese counterpart, Xi Jinping, this week. Over the weekend, top US and Chinese trade negotiators have been working on a range of contentious points, paving the way for Trump and Jim Pink to finalise a deal, and those trade tensions that had been rattling global markets.
A deal removes the risk of steeper US tariffs and China's rare earth export controls.
Investors are also awaiting major central bank meetings later this week for further clues on monetary policy. The ECB is due to me on Thursday and is expected to keep rates unchanged. The main focus will be on the Federal Reserve, which is widely expected to cut rates by 25 basis points, supported by softer-than-expected inflation data on Friday.
Among corporate updates, Porch is rising 1.5% after reporting on Friday, and the adjusted operating loss was smaller than feared.
On the data front, German IFO Sentiment rose in October to 288.4, up from 87.7 in September. This was ahead of forecasts of 88. Expectations are rising across all sectors —industry, construction, and services —offering a glimmer of hope for an upturn. The German economy has struggled to regain momentum this year after contracting 0.3% in Q2. The government expects the German economy to grow 0.2% this year and to rebound with 1.3% growth next year.
DAX forecast - technical analysis
The DAX continues to trade above the multi-month rising trendline. The price also holds above the 50 SMA after briefly spiking below the support, keeping the bullish trend intact.
Buyers will look towards 24,773 and fresh record highs.
Sellers will need a close below the 50 SMA at 24,000 to open the door to a deeper selloff towards 23,675, the October low, and 23,350, the September low.
By Fiona Cincotta
