Market Analysis: UK and US inflation in focus – will GBP/USD push back below 1.2800?

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  • 14.02.2019
  • Comments Off on Market Analysis: UK and US inflation in focus – will GBP/USD push back below 1.2800?

GBP and USD economic events

Source: Economic Events February 13, 2019 – Admiral Markets’ Forex Calendar

The week opened with disappointing economic data. UK GDP came in at only 0.2% on quarter in the three months leading up to December 2018, easing from a 0.6% expansion in the previous period. Industrial production in the UK is decreasing by 0.9% year-on-year up to December of 2018, following a 1.3% fall in the previous month. Today, Pound Sterling traders will carefully watch the inflation data.

Expectations show that a consensus can be found at 1.9% year-on-year, below the BoE’s target rate of 2% and reducing chances of a rate hike in the near future – which were already low due to the ongoing uncertainty regarding Brexit, and could drive GBP/USD back below 1.2800 against the US dollar.

In addition, US inflation data will be released, too. It should come in at 2.1% as expected, and not result in any dramatic changes in the monetary policy of the FED (ie. no rate hikes in 2019, flexibility in regards to the balance sheet runoff), so GBP/USD should be expected to continue its drift downwards, most likely resulting in a drop below 1.2800 and a re-test of the trend line.

From here, a push higher and back towards 1.3000 could be expected if new talks about EU concessions regarding the Brexit deal arise.

GBP/USD 4-hour chart

Source: Admiral Markets MT5 with MT5-SE Add-on GBP/USD 4-Hour-chart (between November 13, 2017, to February 12, 2019). Accessed: February 12, 2019 at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the GBP/USD fell by 5.9%, in 2015, it fell by 5.4%, in 2016, it fell by 16.3%, in 2017, it increased by 7.4%, in 2018, it fell by 5.6%, meaning that after five years, it was down by 22.9%.

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