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Highlights
- The GBP to USD had a bullish start to the session, with monetary policy divergence favoring the Pound.
- It is a busy day on the UK economic calendar. The UK GDP Report will be in focus this morning.
- However, the US PPI Report and US jobless claims will also influence.
It is a busy day ahead for the GBP to USD. The UK GDP Report will garner interest this morning. After the hotter-than-expected wage growth figures, a pickup in UK economic activity would fuel bets on a more hawkish BoE post-summer move to tame inflation.
The markets are betting on the BoE to push rates beyond 6%. How far the BoE is willing to go could depend on the current macroeconomic environment.
Investors should monitor Bank of England chatter. However, no Monetary Policy Committee members are on the calendar to speak today, leaving commentary with the media to influence.
The US Session
It is a busy day on the US economic calendar. US wholesale inflation figures for June and the weekly jobless claims will draw interest. A pickup in wholesale inflation and an unexpected fall in jobless claims could leave the markets to grapple with uncertainty toward a September move.
While the economic indicators will move the dial, investors should also track FOMC member chatter throughout the day.
On Wednesday, the US CPI Report impacted sentiment toward a September Fed rate hike. According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 94.2% versus 93.0% on Tuesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 13.2%, down from 22.3% on Tuesday.
China Trade Data Tested Buyer Appetite Early
China trade data set the tone this morning. Another gloomy set of trade numbers will test buyer appetite early in the European session.
The China USD trade surplus widened from $65.81 billion to $70.62 billion in June. However, the trade surplus widened because of a slide in imports. Exports fell by 6.8%, year-over-year, versus 4.5% in May, while imports tumbled by 12.4% versus 7.5% in May. Economists forecast exports to fall by 4% and imports by 9.5%.
GBP to USD Price Action
Daily Chart
The Daily Chart showed the GBP to USD sit above the $1.2985 – $1.3005 resistance band. Looking at the EMAs, the GBP to USD remained above the 50-day ($1.26382) and 200-day ($1.23684) EMAs, signaling bullish momentum over the near and long term.
Notably, the 50-day EMA continued to pull away from the 200-day EMA and reflected a bullish trend.
Looking at the 14-Daily RSI, the 74.38 reading signaled overbought territory, aligned with the 50-day and 200-day EMAs. A GBP to USD hold above the upper level of the $1.2985 – $1.3005 resistance band would support a run at $1.31. The GBP to USD would need to avoid a fall to sub- $1.30 to target $1.31.
4-Hourly Chart
Looking at the 4-Hourly Chart, the GBP to USD holds above the $1.30 psychological resistance level. After the bullish Wednesday session, the GBP to USD remains above the resistance band and the 50-day ($1.28354) and 200-day ($1.26837) EMAs, sending bullish signals. Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a hold above the $1.2985 – $1.3005 resistance band to target $1.31.
However, the GBP to USD must avoid sub-$1.30 and the lower level of the $1.2985 – $1.3005 resistance band to support a sustained run at $1.31.
The 14-4H RSI reading of 72.89 signaled overbought territory, with buying pressure outweighing selling pressure. Significantly, the RSI aligns with the EMAs and signals a run at $1.31.
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