Yesterday’s trade saw GBP/USD within the range of 1.5309-1.5374. The pair closed at 1.5345, up 0.16% on a daily basis, while marking its fourth gain in the past six trading days.
At 7:02 GMT today GBP/USD was up 0.17% for the day to trade at 1.5375. The pair tested the upper range breakout level (R4), as it touched a daily high at 1.5378 at 7:04 GMT.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
United Kingdom
Consumer inflation
The annual rate of inflation in the United Kingdom probably stood at 0% for a second consecutive month in September, according to the median estimate by experts. If so, this would be the 21st consecutive month, when annualized consumer prices remained below the 2-percent objective, set by the Bank of England. In July the rate of consumer inflation was 0.1%, while the lowest inflation level on record in the country, -0.1%, was reported in April.
In August the most notable downward pressure to consumer prices came from categories such as transport (a 2.6% fall year-on-year, following a 1.9% drop in July), food and non-alcoholic beverages (a 2.4% fall, following a 2.7% decrease in July) and recreation and culture (down 0.9% year-on-year, after a 0.6% slump in July), according to the report by the Office for National Statistics. On the other hand, upward pressure to the Consumer Price Index came from categories such as housing and utilities (up 0.4% year-on-year in August, or the same rate as reported in June and July), restaurants and hotels (up 1.8% year-on-year, following a 1.6% increase in July) and furniture, household equipment and routine maintenance (up at an annualized rate of 0.4%, after a 0.3% slump in July).
The annualized core consumer price inflation probably accelerated to 1.1% in September from 1.0% in August. This indicator measures the change in prices of goods and services purchased by consumers, without taking into account volatile components such as food, energy products, alcohol and tobacco.
In case the annual CPI came in line with expectations or further distanced from the central bank’s inflation objective, this would have a strong bearish effect on the sterling. The Office for National Statistics (ONS) will publish the official CPI report at 8:30 GMT.
United States
Budget Statement
The United States probably recorded a government budget surplus of USD 95.0 billion in September, according to market expectations, after a deficit of USD 64.4 billion during the previous month. The latter represented a 50% decrease compared to August a year ago.
In August total receipts were at USD 211 billion (an 8.8% year-on-year increase), while total outlays amounted to USD 275 billion (a 14.9% year-on-year drop).
Spending for military active duty and retirement, veterans benefits, supplemental security income, and Medicare payments to Health Maintenance Organizations and prescription drug plans were accelerated into July, as August 1st 2015, the normal payment date, fell on a non-business day, according to the report by the US Treasury. The year-to-date budget deficit was at USD 211 billion.
A larger-than-projected budget surplus would have a moderate bullish effect on the greenback. The Financial Management Service is to publish the official figure at 18:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.637% on October 12th, after which it closed at 0.607% to lose 0.008 percentage point compared to October 9th. It has been the first drop in the past six trading days.
The yield on US 2-year government bonds climbed as high as 0.641% on October 12th, after which it fell to 0.637% at the close to lose 0.004 percentage point compared to October 9th. It has been the first drop in the past four trading days.
The spread between 2-year US and 2-year UK bond yields widened to 0.030% on October 12th from 0.026% on October 9th. The October 12th yield spread has been the largest one since October 8th, when the difference was 0.035%.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.872% on October 12th, after which it slid to 1.821% at the close to lose 4 basis points (0.04 percentage point) compared to October 9th. It has been the first drop in the past six trading days.
The yield on US 10-year government bonds climbed as high as 2.074% on October 12th, after which it slipped to 2.070% at the close to lose 2 basis points (0.02 percentage point) compared to October 9th, while marking a second consecutive trading day of decline.
The spread between 10-year US and 10-year UK bond yields widened to 0.249% on October 12th from 0.229% on October 9th. The October 12th yield difference has been the largest one since October 8th, when the spread was 0.276%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.5351
R2 – 1.5357
R3 (range resistance) – 1.5363
R4 (range breakout) – 1.5381
S1 – 1.5339
S2 – 1.5333
S3 (range support) – 1.5327
S4 (range breakout) – 1.5309
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.5274
R1 – 1.5414
R2 – 1.5524
R3 – 1.5664
S1 – 1.5164
S2 – 1.5024
S3 – 1.4914
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