If one would have checked the recent flightlogs of the GBP performance he might have been astounded what he would discover: GBP emerges from the first trading week of the year as the strongest currency and the signs look great for a further rally of the pound:
🟢GBP Positive:🟢
- 🟢 The PMIs in the UK have recently surprised on the upside and so there is light at the end of the tunnel, in contrast to the European counterpart, which has only surprised with more and more negative PMIs
- 🟢 Although wage pressure is falling, it remains high by international standards
- 🟢 There are signs of a recovery in both retail sales and GDP for 2024
- 📊🇬🇧 Inflation will fall quickly and reach 2% mark as early as Q2 2024🟢
- 🟢 That said given the better economic performance it is doubtful whether the BOE will actually cut interest rates as early as its sister from the ECB -> 🟢 I think May would be a realistic scenario for a 1st rate cut by the BOE ✅️
But as every story that sounds to good to be true, the longterm outlook brings some serious concerns for the so far marvellous UK dream story:
🔴GBP Negative:🔴
- 🔴GDP was recently significantly weaker (-0.3) than expected (0.0) - 🔴Industrial production also surprised negatively in relation to expectations at 0.4 - 🔴However, the significantly weaker labour data recently, in which bonus payments in particular surprised to the downside and raised one question in particular, weighs even more heavily and will bring much more rate cuts forward than the BOE and the market are expecting right now.
Conclusion: The outlook for the pound is starting to brighten, but overall the negative factors are likely to outweigh against the USD in the longterm and so I see a promising opportunity to short the GBPUSD (after another rally) from way above. The 1.32 - 1.33 zone would be ideal.
(For everyone who made it this far I have an extra for you: A small quiz in the comments ;)
If someone wants to buy the GBP now, a long trade in GBPCHF is a good idea, which I explain in my following trade idea here:
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📊🇺🇲US Data last week was more mixed, with the NFPs stronger but the ISM weaker. -> US CPI tomorow will decide the direction for this pair for the coming days and weeks🟢
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📊🇺🇲 Both the US CPI (inflation data) and the jobless claims surprised positively today 🟢 -> This is good for the USD in the long term, but the 🇬🇧GBP is still holding up well, which points to the pound's own strength🇬🇧
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📊🇺🇲 US data has recently been brutally strong and has consequently led to sustained USD strength. 🇬🇧 Even the second strongest currency this year, the pound, was unable to resist the USD steamroller entziehen🇺🇲
This means that the GBPUSD still lacks a lot to trigger my entry. -> I will remain patient and keep an eye on data events to come -> one of them the US CPI report next tuesday!📊🇺🇲
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This week we have the 📊🇬🇧UK CPI as well as the 🏛🇺🇲 meeting of the US FED -> both are extremely important data points for the GBPUSD.
If the UK CPI surprise heavily to the downside the GBPUSD could be a great short!🟢
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📊🇺🇲 While the US CPI data came in higher than expected yesterday, the market is slowly starting to question whether we will actually see 3 rate cuts from the US FED this year -> Stubborn inflation is making the FED's job very complicated and will continue to support the USD🟢 (-> GBPUSD will remain under pressure)
A small quiz: (3 questions to you attentive reader) 1. How far can the GBP rally go from here? 2. What are the reasons for shorting the GBPUSD longterm? 3. Why were the cameras turned off?
paulonwurah
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@PrimeTrading, 1. 1.32-1.33 zone. 2. The outlook of the pound seems to be okay at the short term. However, tje negative factors are likely to outweigh against the USD in the long term.