Tomorrow, the UK is going to announce their monthly adjusted GDP for July. Pound pairs are volatile today while uncertainty and doubt in the central bank's policies going forward. The direction of GBP will likely be shaped by tomorrow's numbers, but here are some factors to consider.
If the UK announces a fall in GDP, which is expected, the BoE might have to start loosening up on the pound. Deterring focus from the strength of their currency would result in a stronger economy. The downside to that is an acceleration of inflation.
The expectation is a considerable drop from June, so we could see a beat in forecasts while still looking at a lower growth in output. Either way, it looks like the UK is in for some bad news.
Strong Stock Market
Another thing to consider is that the equities market in the US getting stronger each day on good inflation and jobs numbers within the past week. There is a strong correlation between the British pound and the S&P 500 index. If equites continue to rise, GBP could ride on the coattails.
It's now much tougher to tell where stocks are headed as well. Investors do see a light at the end of the tunnel, however, rates will only continue to rise. The question of whether or not the US is still experiencing a bear market rally or entered a new bull market is still up in the air.
Pound Pairs to Trade
GU rises with US equities as investors wait for GDP numbers to come out tomorrow. The pair is coming up near resistance around 1.22961. If GDP comes in lower than last month, investors might think that BoE will have to reduce hawkishness to focus on economic growth. This would likely take the pound lower, although a strong US stock market is carrying GU with it.
A big break in support on pound-aussie looks extremely bearish for the pair. If this candle closes below the 1.71748 level, we could expect further downside for some time. A new level of resistance looks to be in the making on the 1D timeframe which would be a tough level to break back above.
Pound-CAD looks weaker too. Price fell lower on the 4H timeframe as it nears the falling trend line for support. Lower highs and a fail to test resistance suggest weakness in the pair. Price may come down to test 1.55075 should we see another sell off.
Yesterday, the Federal Open Market Committee (FOMC), the Federal Reserve’s policy-making body, implemented yet another 75 basis point interest rate hike. While this move was perfectly in line with market forecasts, Chair Powell’s comments following the subsequent press conference, in which he discussed the FOMC’s new set of economic projections, were significant. He continued to […]
Statistics Canada released a surprising new batch of inflation data this morning: month-over-month CPI failed to meet market forecasts, declining by 0.3% instead of the anticipated 0.1%. Rather than being an outlier, the other measurements of CPI mostly followed suit, as both year-over-year Trimmed CPI and Median CPI likewise failed to meet expectations. Trimmed CPI’s […]
At 9:30 pm Eastern Time tonight, the Reserve Bank of Australia (RBA) will be publishing their latest round of monetary policy meeting minutes. While there is a chance that their intentions could come across as more hawkish than expected, they currently have little reason to be. Despite relatively low unemployment at 3.5%, steady GDP growth, […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here