Market Analytics and Considerations
Key notes
- For the first half of this week, US Dollar Fundamentals Are likely to impact GBP/USD.
- Mixed Messages from the Technical indicators – Could the price action remain essentially flat throughout the coming year?
- A More Decisive Move Might Be Catalyzed by UK GDP and US Core PCE.
Foundational Landscape of GBP/USD
Thanks to a declining dollar index and a general increase in risk-taking, the GBP/USD is poised to end a two-day falling run. As we head into the US day, the pair is trading under 1.22000 after the dollar’s minor comeback during the European period.
Given the conflicting messages from the central banks the other week, the British pound’s advances to start the week are somewhat unexpected. The Bank of England disclosed a vote split, with two individuals voting against such an increase in interest rates, despite the US Federal Reserve being somewhat hawkish. The news caused Sterling to retrace its 6-month decline versus the US dollar, putting the GBP below 10% YTD. The Fed’s aggressive view will keep dollar enthusiasts in the game and put additional pressure on prices on the GBP/USD exchange rate.
The UK Treasury has since announced that the following budget would be presented on March 15, 2023. The Office for Budget Responsibility (OBR) has been asked by Chancellor Hunt to produce an economic and fiscal estimate that will be released with the Springtime Budget in 15 March next year (2023)
Up until the announcement of UK GDP on Thursday, the economic calendar is largely devoid of any significant market-moving statistics, which means that the GBP/USD exchange rate will primarily be influenced by the US dollar index. As the Fed’s favored inflation indicator, the publication of the Core PCE figures on Friday may prove to be another catalyst for the duo on the US front.
Technically, the GBP/USD pair is in a bull market as long as it trades just above 1.21270 mark (the cycle low from December 7) as well as the 200-day MA. If the daily candle finishes underneath this level, GBP/USD could experience more losses down near the 1.2000 and possibly even lower. The 200-day MA, which is presently lying near 1.21000, may act as a substantial barrier to even further down. The fulfillment of the golden crosses configuration, a signal that the upward trend may persist, supports an upward story.
