GBPCHF and GBPUSD
The median forecast had been for an unchanged 2.4% reading.UK July CPI came in slightly warmer than expected at 2.5% y/y in the headline reading, up from 2.4% y/y in June. The rise was driven by higher petroleum prices while July core CPI came in at 1.9% y/y, unchanged from June and meeting the consensus expectation. At 1.9% y/y the core CPI figure is the lowest level it has been since March 2017. Input PPI rose 10.9% y/y, a fifth consecutive month of increase at this rate and up from 10.3% in the previous month, beating the market expectation for 10.6%. Output PPI rose 3.1% y/y, down from 3.3% y/y in June.
Sterling has ticked lower in the wake of the data release, with markets focused on the unchanged core CPI reading and overlooking the unexpected tick higher in headline CPI. The flat core CPI reading suggests that domestically-generated inflationary pressures, which BoE is playing close attention to, remain contained.
In the FX market, GBPUSD is nearly unchanged in the wider picture while it has drifted 25 pips lower to 1.2697 on the data announcement. In general, the Pound remains extremely weak in contrast with the in-line data today but more precisely the release of the monthly UK labour market report yesterday, which revealed an unexpected drop in the unemployment rate to 4.0% — the lowest since February 1975.
This is due to the fact that the same report also showed an unexpected dip in average earnings and a rise in the number of economically inactive people. The ebb in Her Majesty’s currency affirms a heavy tone in Cable, which has struggled to maintain rebounds at 1.2700 lows . The Dollar is seen as a safe haven in the event of further bouts of risk aversion, while political and associated Brexit-related uncertainty are continuing to keep a lid on Sterling’s upside potential. Cable has immediate Resistance at yesterday’s peak at 1.2830. Immediate Support holds at today’s low at 1.2690. Next Support levels come at June’s 2017 lows, within 1.2635 and 1.2590 range (5-month Resistance , November 2016 – March 2017)
Another interesting Pound cross is GBPCHF, which has recouped to around the 1.2690 level after drifting yesterday to the 50.0% Fib. level set from the 2016 low, and falling to an 11-month low at 1.2626. Based on general Pound weakness and the sharp decline seen in the last 4 months for GBPCHF, today’s rebound suggests a small correction to the upside before moving again to the downside. This is also confirmed by intraday momentum indicators which continue to support the continuation of the bearish sentiment for the pair.
Therefore as long as GBPCHF does not break above yesterday’s peak at 1.2731, a move again to the downside is expected during the day. Next immediate Resistance holds at the 200-period EMA in the hour chart, at 1.2775, after the break of 1.2731. GBPCHF has immediate Support at 1.2630, which encompasses the 50.0% Fib. level of the rally seen from September 2016. Further losses below this level could open the doors towards the round 1.2500 level.
Click here to access the HotForex Economic calendar.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! The next webinar will start in:
[ujicountdown id=”Next Webinar” expire=”2018/08/15 14:00″ hide=”true” url=”” subscr=”” recurring=”” rectype=”second” repeats=””]
Andria Pichidi
Market Analyst
HotForex
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
