US CPI Eyed: GBP/USD to 1.2815?
Fiona Cincotta June 11, 2019 3:47 PM
Improved sentiment on the trade front and worse than forecast PPI data from the US hit demand for the dollar. Inflation at wholesale level dropping to 1.8% doesn’t bode well for future consumer inflation
Pound rallies as wages unexpectedly rise
The pound was experiencing a rare up day, rebounding from a 4-month low as investors reacted to the better than expected employment data. UK unemployment held steady at a 44-year low whilst UK average wages unexpectedly jumped in the three months to April. Wages increased 3.4%, higher than the 3.3% previously and significantly above the 3.1% forecast.
US PPI hit dollar ahead of Wednesday’s CPI
Improved sentiment on the trade front and worse than forecast PPI data from the US hit demand for the dollar. Inflation at wholesale level dropping to 1.8% doesn’t bode well for future consumer inflation and only served to reinforce expectations that the Fed will be cutting interest rates, possibly as soon as the July meeting.
The market is currently pricing in a 78% probability of a rat cut in July and a 92% chance of a cut in September.
Traders will now turn their attention to US CPI data on Wednesday. Expectations are for consumer inflation to drop to 1.9% yoy from 2.1% in April. Weaker data could boost expectations of a rate cut further and drag the dollar lower.
GBP/USD Levels to watch:
GBP/USD uptrend is marginally positive as it trades above 50 and 100 sma, but below 200 sma. Support can be seen at $1.2685 prior to $1.2640 and $1.2605. On the upside resistance $1.2750, $1.2763 and $1.2815.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.