POUND STERLING TALKING POINTS
- U.S. inflation could beat estimates.
- Liz Truss and Rishi Sunak race heats up!
- Consolidatory GBP/USD price action awaits fundamental catalyst.
GBP/USD FUNDAMENTAL BACKDROP
Cable is largely unchanged after yesterday’s close as markets remain apprehensive ahead of U.S. inflation data later today (see economic calendar below). With nothing scheduled for the UK today, CPI takes center stage with expectations at 8.7%. After reviewing the Cleveland Fed’s nowcast data, many economists are looking for an actual issue around the 9% mark which could see the dollar bid post-CPI. Last week’s stellar NFP print did not reveal itself in dollar price action and a upside surprise could definitely help dollar bulls claw back some lost gains this week.
Source: DailyFX Economic Calendar
The UK political dance has gained some attention overnight with Chris Skidmore switching sides from Rishi Sunak to Liz Truss on the basis that Mr. Sunak’s campaign seems to be lacking consistency. Furthermore, Liz Truss stated that she favors tax cuts as opposed to Mr. Sunak’s £15bn energy bill. The energy argument comes after yesterday’s statement by the Department of Business, Energy and Industrial Strategy outlining the potential for blackouts in homes and business under their “reasonable worst-case scenario”.
TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
GBP/USD price action reflects a cautious approach this week as investors look to U.S. CPI for forward guidance. We are seeing this across global markets so I expect an uptick in volatility pre and post announcement.
Key resistance levels:
Key support levels:
- 1.2080/20-day EMA (purple)
- 1.2000
MIXED IG CLIENT SENTIMENT
IG Client Sentiment data (IGCS) shows retail traders are currently LONG on GBP/USD, with 69% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however due to recent changes in long and short positions we settle on a short-term cautious bias.
Contact and follow Warren on Twitter: @WVenketas
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