Forex Market: GBP/USD daily trading outlook

Written by Miroslav Marinov

Miroslav Marinov, a financial news editor at TradingPedia, is engaged with observing and reporting on the tendencies in the Foreign Exchange Market, as currently his focus is set on the major currencies of eight developed nations worldwide.

, | Updated: October 30, 2024

Yesterday’s trade saw GBP/USD within the range of 1.4233-1.4325. The pair closed at 1.4252, shedding 0.15% on a daily basis. It has been the 9th drop in the past 11 trading days and also a second consecutive one. The daily low has been the lowest level since May 20th 2010, when a low of 1.4229 was registered.

At 7:51 GMT today GBP/USD was gaining 0.26% for the day to trade at 1.4281. The pair touched a daily high at 1.4296 at 7:08 GMT, undershooting the upper range breakout level (R4), and a daily low at 1.4239 during early Asian trade. Support may be received in the area around the low from January 18th (1.4233). Resistance, on the other hand, may be observed at the hourly 55-period EMA (1.4297) and then – in the area around the high from January 18th (1.4325).

On Tuesday GBP/USD trading may be influenced by the following macroeconomic reports listed below.

Fundamentals

United Kingdom

Consumer Price Index

The annual rate of inflation in the United Kingdom probably accelerated to 0.2% in December, according to the median estimate by experts, from 0.1% in November. If so, this would be the 24th consecutive month, when annualized consumer prices remained below the 2-percent objective, set by the Bank of England. However, it would also be the highest annual inflation since January 2015, when consumer prices climbed 0.3% year-on-year.

In November upward pressure to consumer prices came from cost of housing and utilities (up 0.3% year-on-year and following a 0.2% gain in October). An additional upward impulse came from prices at restaurants and hotels (a 1.8% surge and following a 1.6% gain in October) and prices of miscellaneous goods and services (up 1.3% year-on-year and accelerating from a 0.8% increase in the preceding month), according to the report by the Office for National Statistics.

On the other hand, in November downward pressure to the Consumer Price Index came from cost of transport (down 2.1% year-on-year and following a 2.6% slump in the prior month), cost of recreation and culture (down 0.1% and following a 0.4% fall in October) and prices of food and non-alcoholic beverages (down 2.4% after another 2.7% drop in October). Cost of clothing and footwear remained without change in November from a year ago, after a 0.8% surge in October.

The annualized core consumer price inflation probably remained steady at 1.2% in December, according to market expectations. It has been the highest core inflation since July 2015. In October the core CPI went up at an annualized rate of 1.1%. 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 approached the central bank’s inflation objective, this would have a strong bullish effect on the pound. The Office for National Statistics (ONS) will publish the official CPI report at 9:30 GMT.

BoE Carneys statement

At 11:00 GMT Bank of England Governor Mark Carney is expected to take a statement. His remarks could have a considerable influence on the local currency, triggering short-term positive or negative trends.

United States

NAHB Housing Market Index

The National Association of Home Builders (NAHB) Housing Market Index probably remained at 61.0 for the second consecutive month in January, according to market expectations. If so, this would be the 19th consecutive month, when the gauge stood in the area above 50.0. In November the index was reported at 62.0. The indicator is based on a monthly survey in regard to current home sales and expected sales in the coming six months. Values above the key level of 50.0 indicate that housing market conditions are good. Therefore, higher-than-projected readings would provide a moderate support to the US dollar. The official report is scheduled for release at 15:00 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.486% on January 18th, after which it closed at 0.461% to add 2.1 basis points (0.021 percentage point) compared to January 15th. It has been the 10th gain in the past 23 trading days.

The yield on US 2-year government bonds climbed as high as 0.854% on January 18th, after which it closed at 0.849% to lose 0.001 percentage point compared to January 15th. It has been the 16th drop in the past 24 trading days and also a fifth consecutive one.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.388% on January 18th from 0.410% on January 15th. The January 18th yield spread has been the lowest one since December 24th, when the difference was 0.382%.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.707% on January 18th, after which it closed at 1.693% to add 2.9 basis points (0.029 percentage point) compared to January 15th. It has been the 9th gain in the past 23 trading days.

The yield on US 10-year government bonds climbed as high as 2.047% on January 18th, after which it slipped to 2.045% at the close to add 0.008 percentage point compared to January 15th. It has been the 10th gain in the past 24 trading days.

The spread between 10-year US and 10-year UK bond yields narrowed to 0.352% on January 18th from 0.373% on January 15th. The January 18th yield difference has been the lowest one since January 13th, when the spread was 0.346%.