The pound was yesterday’s best performer while GBP/USD broke above a descending trend line that is held in the cable since January. As mentioned in previous analysis, we now take a rather bullish stance in this pair but recommend long-term oriented traders waiting for a bullish break of the 1.40-barrier.
The U.K.’s Spring Budget statement has helped the pound to regain some strength as growth forecasts were upgraded.
U.S. CPI data, on the other side, was not strong enough to alter Fed rate hike expectations and thus, the dollar weakened against other major peers. The next FOMC meeting is on March 21 but with inflation holding steady, market participants are bracing for a dovish rate hike next week.
Meanwhile, the dollar came under increased pressure as White House instability continues. U.S. President Trump fired Secretary of State Rex Tillerson and this sudden staff turnover comes only one week after Gary Cohn resigned from the White House. Trump administration concerns generally pose a threat to the greenback.
GBP/USD: The pound broke out of its triangle formation and headed towards 1.40. We now wait for a sustained break above that psychological barrier in order to anticipate further gains towards 1.4070 and 1.4150. A lower support is seen around the 1.3830-level.
EUR/USD: The euro traded with a tailwind on the back of a weakening dollar while breaking above 1.2370. As expected in Monday’s analysis, that upside break encouraged bulls to drive the euro toward a test of 1.24 and it will be interesting whether the single currency is able to stabilize above that level.
Today we will listen to ECB President Draghi’s speech at 8:00 UTC and keep an eye on the U.S. Retail Sales Report scheduled for release at 12:30 UTC.
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