GBP/USD: Road to recovery intact, eyes on UK politics, US CPI/ Fedspeak
|- GBP/USD buyers ignore the mixed bag of the UK data as dovish Fed is all around.
- Boris Johnson came under pressure after Sir Kim Darroch’s resignation.
- Senior members of the opposition Labour party members are accused of anti-Semitism.
- UK politics, US CPI and second day of the Fed Chair’s Testimony will be in the spotlight.
Despite mixed data and political pessimism at the UK, the GBP/USD pair buyers cheer the US Dollar (USD) weakness as the quote rises to 1.2534 while heading into the London open on Thursday.
While official figures of the UK Gross Domestic Product (GDP) differed from NISER, lower than expected prints of the Manufacturing and Industrial Production flashed the British Pound (GBP) weakness earlier on Wednesday.
Though the downtick couldn’t last long after the Testimony from the US central bank Chairman and minutes of the latest meeting poured cold water on the recent optimism surrounding the US Federal Reserve’s future monetary policy moves, mainly driven by upbeat employment data from the US.
Market’s anti-USD mode was strong enough to ignore latest comments from the European Commission head nominee Ursula von der Leyen as she turned down chances of fresh Brexit deal talks and supported hard Irish backstop.
At the political front, the frontrunner to the UK Prime Minister’s (PM) post, Boris Johnson, is criticized over his lack of support to the British Ambassador to Washington after Sir Kim Darroch resigned abruptly. Further, senior members of the opposition Labour party, like Seumas Milne and Jennie Formby have been accused of anti-Semitism, giving ruling Tories a chance to move away from criticizing Mr. Johnson.
On a broader scale, the US-China uncertainty surrounding the trade deal remains on focus while likely escalation of geopolitical tension between the US and Iran also added weakness to the greenback.
Other than the British political plays, the US Consumer Price Index (CPI) and second day of the Fed Chair’s Testimony will be closely followed for fresh direction. Forecasts suggest the headline US CPI to rise to 0.2% from 0.1% on MoM basis but might soften to .6% from 1.8% on a yearly format. Further, the CPI ex-food and energy could also rise to 0.2% from 0.1% on a monthly basis in June with the YoY figures likely being unchanged to 2.0%.
Technical Analysis
While 21-day exponential moving average (EMA) level of 1.2605 acts as near-term key resistance, the buyer may wait for the successful break of 50-day EMA, around 1.2705 before challenging late-June high close to 1.2785. Alternatively, 1.2500 and 1.2440, followed by current month low near 1.2430, hold the keys to the pair’s downpour to 1.2400 round-figure.
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