GBP/USD – British Pound Dips, BoE Inflation Report Next

The British pound has started the week with losses. In Monday’s North American session, GBP/USD is trading at 1.3422, down 35% on the day. On the release front, there are no key indicators on the schedule. British Rightmove HPI gained 0.8% in May, up from 0.4% a month earlier. In the US, the sole event is a speech from FOMC member Raphael Bostic. On Tuesday, the UK releases a host of inflation indicators, led by CPI. The US will publish the Richmond Manufacturing Index.

All eyes will be on BoE Governor Mark Carney on Tuesday, when he testifies on inflation and the economy before a parliamentary committee. Inflation levels have been falling, with CPI hovering at 2.5%, compared to 3.0% early in 2018. The drop in inflation has eased pressure on the BoE to raise rates, and policymakers passed on a rate hike earlier in May, given lower inflation and a spate of soft economic indicators. The odds of a rate hike at the August meeting are just 47%. If Carney presents a dovish stance to lawmakers on Tuesday, the pound could lose ground.

After weeks of an escalating trade war between the US and China, there was a breakthrough of sorts on Sunday. The US dollar has posted gains after Treasury Secretary Steven Mnuchin announced that the two sides had made significant progress and the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants had traded stiff tit-for-tat tariffs in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can sit down with the Chinese and discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. The news that the sides had backed down sent stock markets higher, and traders will likely be greeted with gains when European markets reopen on Tuesday.

  A test of the breakouts

Meaningful Progress Made in US and China Trade Talks

 

GBP/USD Fundamentals

Sunday (May 20)

  • 19:01 British Rightmove HPI. Actual 0.8%

Monday (May 21)

  • 11:30 US FOMC Member Rafael Bostic Speaks

Tuesday (May 22)

  • 4:30 British Public Sector Net Borrowing. Estimate 7.2B
  • 5:00 British Inflation Report Hearings
  • 6:00 CBI Industrial Order Expectations. Estimate 2
  • 10:00 US Richmond Manufacturing Index. Estimate 9

*All release times are DST

*Key events are in bold

 

GBP/USD for Monday, May 21, 2018

GBP/USD May 21 at 10:20 DST

Open: 1.3470 High: 1.3584 Low: 1.3391 Close: 1.3423

 

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3186 1.3301 1.3402 1.3494 1.3613 1.3712

GBP/USD lost ground in the Asian session. The pair edged lower in European trade but recovered these losses. GBP/USD is showing little movement in the North American session

  • 1.3402 was tested earlier in support. It remains a weak line
  • 1.3494 is the next resistance line
  • Current range: 1.3402 to 1.3494

Further levels in both directions:

  • Below: 1.3402, 1.3301 and 1.3186
  • Above: 1.3494, 1.3613, 1.3712 and 1.3796

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing long positions with a majority (61%). This is indicative of trader bias towards GBP/USD reversing directions and moving lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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