Jump to content

GBP in focus as markets expect another jump in UK inflation


Recommended Posts

The pound looks primed for potential upside as traders look for a potential 10.7% inflation figure tomorrow morning. Could a US-UK CPI divergence help lift sterling

bg_pound_sterling_360593090.jpgSource: Bloomberg
 
 Joshua Mahony | Senior Market Analyst, London | Publication date: Tuesday 15 November 2022 

UK inflation expected to continue its push higher

The past week has seen major volatility throughout financial markets, with the decline across both headline and core inflation in the US lifting hopes that we will see the Fed take their foot off the gas. However, that upward trajectory for prices is not equal across countries, with European inflation yet to show a similar reversal in its trajectory. That fact comes back into the limelight tomorrow as the latest UK inflation figure is released at 7am. The chart below highlights how that turn for US inflation has created a situation where UK CPI has outstripped US price growth by the highest degree since early 2011. During the 2010 period where the gap was widening, we did see GBPUSD strengthen before falling back once again.

INFLATIONCOMPARED151122.PNG

Much comes down to risk assets given the role of the dollar as a haven when markets are turning lower. However, we could yet see another similar period of upside for GBPUSD if global markets remain confident based on the idea that US inflation has topped out. With that in mind, keep a close eye out for tomorrows UK CPI number. While US interest rates are above those in the UK, we have heard from several Fed members that point towards a slowing in the pace of rate hikes after four consecutive 75-basis point hikes. In the UK, markets are somewhat split about whether we will see a 50 or 75bp move, but those expectations are likely to shift once we see the latest inflation data. Given widespread expectations of a whopping 10.7% CPI figure in the UK, there is a good chance we see the Bank of England maintain a rapid pace of tightening as the Fed starts to slow.

RATESCOMPARED151122.PNG

GBPUSD technical analysis

Looking at GBPUSD, we can see how the recent US inflation data helped drive the pair up through trendline resistance. With price also pushing through the 76.4% Fibonacci resistance level today, there is a good chance we see the pair push higher in the event that UK inflation increases as expected. Although it is worth mentioning that the risk to that theory is the potential for a risk-off move for markets which could see the pair move lower. Thus, it is worthwhile keeping an eye out for the wider market moves too as a gauge of where the dollar might move.

GBPUSD-Daily-2022_11_15-15h06.pngSource: ProRealTime

GBPJPY technical analysis

While GBPUSD could benefit if markets continue to trade in a risk-on environment, it is worthwhile following GBPJPY given the Bank of Japan’s unwillingness to tighten in the face of rising inflation. Especially given the fact that Japanese CPI stands at a lowly 3.0% as of September. Given the many years of largely non-existent inflation in Japan, this above-target figure simply allows them to play catch-up. As such, another pop in UK inflation would likely provide another move higher for GBPJPY. The daily chart highlights how price has recently dropped back into the 76.4% Fibonacci support level, As such, bullish positions are favoured unless price drops through the 15974 swing-low.

GBPJPY-Daily-2022_11_15-15h04.pngSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      22,978
    • Total Posts
      95,287
    • Total Members
      43,586
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    aroyi
    Joined 22/09/23 03:49
  • Posts

    • Stock market analysis and trading strategies: NASDAQ,QQQ, Apple (AAPL),Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft MSFT, Meta Platforms, Netflix (NFLX), Alphabet GOOGL  Stock Market Summary: Further downside to complete the Wave c) of 4 correction (Indices) There are two different patterns for stocks, the stocks that have just topped like Alphabet, Amazon, Berkshire Hathaway are in their Wave a) of 4 and the other stocks are in the Wave c) of 4, that said Apple is slightly different, but can be tied into the Wave c) of 4 patterns. Trading Strategies: Short side Video Chapter 00:00  NASDAQ 100 (NDX) / QQQ / Berkshire Hathaway 06:27 Apple (AAPL) 07:34 Amazon (AMZN) 08:54 NVIDIA (NVDA) 10:08 Meta Platforms (META) 14:07 Netflix (NFLX)  15:37 Alphabet (GOOGL) 17:26 Microsoft MSFT 21:27 Tesla (TSLA) 24:45 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge.com     
    • The "best" percentage of your investment portfolio to allocate to cryptocurrencies depends on your individual financial situation, risk tolerance, investment goals, and time horizon. There is no one-size-fits-all answer to this question, as what's appropriate for one person may not be suitable for another. Here are some considerations to help you determine the right percentage for your situation: Risk Tolerance: Cryptocurrencies are known for their price volatility. Consider how comfortable you are with the possibility of significant price fluctuations. Generally, if you have a lower risk tolerance, you may allocate a smaller percentage to cryptocurrencies. Financial Goals: Your investment goals play a crucial role in determining your crypto allocation. Are you investing for short-term gains, long-term growth, or a specific financial milestone (e.g., retirement)? The time horizon for your goals can influence your crypto allocation. Diversification: Diversification is a risk management strategy that involves spreading your investments across different asset classes. Diversifying your portfolio can help reduce risk. Experts often recommend not putting all your funds into a single investment, including cryptocurrencies. The specific percentage you allocate to crypto should consider the diversity of your overall portfolio. Knowledge and Research: Your understanding of cryptocurrencies matters. If you're well-versed in the crypto space and have confidence in your ability to evaluate and manage crypto investments, you might allocate a higher percentage. However, if you're new to cryptocurrencies, it's wise to start with a smaller allocation until you gain more experience. Financial Situation: Consider your current financial situation, including your income, expenses, and existing investments. Ensure that you have an emergency fund and meet your other financial obligations before allocating a significant portion to cryptocurrencies. Regulatory and Tax Considerations: Be aware of the regulatory and tax implications of cryptocurrency investments in your jurisdiction. Tax laws regarding cryptocurrencies can vary significantly, and it's essential to comply with them. Asset Allocation Strategy: Many financial experts recommend following a structured asset allocation strategy based on your risk tolerance and investment goals. This strategy might suggest a certain percentage for different asset classes, including stocks, bonds, real estate, and cryptocurrencies. Regular Review: Periodically review and rebalance your portfolio to ensure it aligns with your goals and risk tolerance. Cryptocurrency prices can change rapidly, so your allocation may need adjustments over time. Ultimately, there is no universally "best" percentage to invest in cryptocurrencies. It's a highly individual decision that should be made based on your unique circumstances and objectives. It's also important to conduct thorough research and consider seeking advice from a financial advisor or investment professional before making any significant changes to your investment portfolio.
    • Can orsted shares be purchased on the platform?
×
×
  • Create New...
us