GBP/USD falls on USD strength & debt ceiling optimism
- US debt ceiling deal could be agreed this week
- BoE’s Bailey warns on wage price spiral
- GBP/USD trades range bound 1.2420 to 1.2520
GBP/USD is falling as the US dollar rises on debt ceiling deal optimism. After progress in talks, both President Biden and McCarthy underscored a determination to strike a deal to lift the $31.4 trillion debt ceiling. The move to negotiate directly appears to be paying off, after months of standoff. The Biden administration that a deal on raising the US debt ceiling could be reached as soon as this week.
The mood music has changed, and fears of a potential U.S. debt default as soon as early June have eased considerably, boosting the greenback. The US dollar trades at an almost 2-month high versus a basket of currencies.
The selloff in the pound could be limited after hawkish comments from BoE Governor Andrew Bailey yesterday, where he doubled down on the central bank’s intention to fight inflation.
Mr. Bailey warned over persistently high inflation, blaming high food inflation and a tight labour market. He admitted that the economy is experiencing a wage-price spiral, adding that the BoE is prepared to hike rates as far as necessary to bring inflation down. Although he added that the picture was bright than is was a few months ago, with the UK no longer expected to enter a recession.
Looking ahead US jobless claims are expected to ease to 254k, from 264k the previous week. Fed speakers will also be in focus.
GBPUSD outlook- technical analysis
GBP/USD broke below the multi-month rising trendline and is consolidating between 1.2420 and 1.2520. The RSI is neutral.
A break below 1.2420, the weekly low, and the 50 sma at 1.2390 open the door to support at 1.2350 and a deeper selloff to 1.2275 the 100 sma.
On the flip side, should buyers push above 1.2520nthe 20 sma, resistance at 1.2550, the weekly high comes into play ahead of 1.26.
DAX breaks out to a 15 month high
- DAX rises above 16000 resistance on hopes of a US debt ceiling deal
- ECB Christine Lagarde to speak
- 16143 resistance in focus ahead of 16285
DAX, along with its European peers, is heading higher on optimism surrounding the US debt ceiling. After progress in talks, Wall Street closed firmly higher, which is now translating to a stronger open in Europe.
The economic calendar is light in the European session. However, ECB speakers will be in focus. ECB President Christine Lagarde’s comments will be watched carefully. Any commentary surrounding inflation or monetary policy could influence the DAX.
Further ahead in the US session, jobless claims and the Philly Fed manufacturing index could impact the market mood.
DAX outlook – technical analysis
After trading rangebound over recent weeks the DAX has broken above the key 16000, a key resistance, and trades at a 15-month high. The index could run into resistance at 16140 the rising trendline resistance, ahead of 16286 the all-time high.
On the flip side, a break back below 16000 open the door to 15850 the rising trendline support ahead of 15650 the May low.