GBP/USD: U.K. Inflation Report To Dictate Price Action
Dear Traders,
While the U.S. dollar ended the day virtually unchanged against the euro, it traded slightly lower versus the British pound Monday. Meanwhile, there were no new insights from Federal Reserve Chair Janet Yellen. She reiterated several previously stated positions when speaking at the University of Michigan. Yellen said she expected the U.S. economy to continue to grow at a moderate pace and that gradual interest rate increases “can get us where we need to be”. Fed policy makers expect two additional rate hikes in 2017.
The British pound recovered some losses and rose towards 1.2430. However, as long as the pound remains below 1.2450/70, we favor a bearish stance. For sterling to rally it would possibly require a break above 1.2480 and further 1.2505. Today’s price action will hinge on the U.K. inflation report, scheduled for release at 8:30 UTC. If Consumer Price growth comes in with a downtick, sterling could fall towards 1.2340. Stronger inflation however, may encourage sterling bulls to push the currency beyond the 1.2470-level.
The euro trod water with the price reluctant to push above the 1.06-mark. Euro traders remain risk-averse ahead of the French elections and with no market-moving data on the calendar, the euro might continue to trade sideways within tight trading ranges. The German ZEW Survey is scheduled for release at 9:00 UTC but this report cannot be considered important enough to free the euro from its lethargy. In short-term time frames we expect the euro’s price action to be limited to a trading range of 1.0640 and 1.0530.
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