GBPUSD Short Trend at 1.27 before Bailey speech!
The GBP/USD pair continued to experience gains during the American session, reaching a new monthly high at 1.2715 before a modest retracement. The British Pound maintains its strength against the US Dollar, with the GBP/USD comfortably trading above the 1.2600 level after touching Monday's peak at 1.2644, the highest since last August. The Governor of the Bank of England (BoE), Andrew Bailey, stated on Monday that achieving the 2% inflation target would be a challenging task. Despite the central bank raising rates to 5.25% between 2022 and 2023, Bailey acknowledged the negative impact higher rates can have on households but added that it is still too early to consider rate cuts. Inflation in the UK, measured by the Consumer Price Index (CPI), was 4.6% year-on-year in October, more than double the central bank's comfort level. From a data perspective, the UK's macroeconomic agenda is relatively light this week. The country released the October Retail Price Index (BRC), which showed a 4.3% year-on-year increase, an improvement from the previous month's 5.2%. From a technical standpoint, the market exhibits a strong upward trend after breaking out of the bullish channel, and personally, I anticipate a pullback towards 1.2530 before further upward movement with the goal of surpassing the supply zone at 1.2970 and subsequently retesting the upper part of the daily supply zone. Wishing everyone successful trading, greetings from Gaia.
Comment:
The GBP/USD has recorded positive gains for the fifth consecutive day, reaching a new three-month high. Bets on the end of Fed rate hikes and the possibility of a policy reversal in 2024 have weakened the US dollar. Reduced odds of an imminent BoE rate cut have further supported the ascent of the British Pound. Despite the BoE raising rates to 5.25% between 2022 and 2023, Governor Bailey stated that bringing inflation to 2% will be challenging. In October, UK inflation was 4.6%, more than double the BoE's comfort level. Policymakers anticipate inflation returning to 2% by 2025. Vice Governor Ramsden indicated that British inflation is primarily domestic, and monetary policy will need to be restrictive for an extended period. The UK's macroeconomic agenda is light this week, with the October BRC Retail Price Index improving to 4.3% year-on-year. After the Asian session, my short-term view remains bearish.
Comment:
The GBP/USD experienced a descent towards the 1.2650 region during Thursday's European trading hours. The US dollar gained ground, exerting downward pressure on the pair, while markets remained cautious awaiting US PCE inflation data, BoE and Fed speeches. The daily chart indicates the pair is trading around its opening level, with higher highs and lows, suggesting a potential upward trend. Technical indicators show a firmly upward-oriented momentum, but the Relative Strength Index (RSI) is losing strength. The pair is above its moving averages, with the 20-period SMA on the rise. Although the GBP/USD is overbought in the short term, a steeper decline appears unlikely at the moment. Following a significant decline in the US dollar on Tuesday, the pair reached its highest level since August at 1.2732. The dollar's decline was triggered by accommodative comments from the Federal Reserve, suggesting the central bank might have concluded rate hikes. The dollar saw some recovery on Wednesday, but the GBP/USD maintains around 1.2680 in the midday European session. Minor UK data proved encouraging, with an unexpected increase in October's Consumer Credit, though below expectations. Meanwhile, the drop in US Treasury yields limits the dollar gains, with the 10-year Treasury yield at its two-month low. The US will release the second estimate of third-quarter GDP, expected at 5%, and several Federal Reserve speakers will give speeches. Bank of England Governor Andrew Bailey will make brief remarks at an event celebrating the 50th anniversary of the Joint Standing Committee on London Foreign Exchange.