UK Rates and US Data Will Drive GBP/USD

GBP/USD rates, charts and analysis

• UK Treasury yields rose sharply on renewed expectations of a rate hike in the UK.
• The IMF does 180 on UK growth prospects.
• Little is in the way of UK data next week.

The figures showed that headline inflation in the UK fell back to the single digits, but failed to meet analysts’ expectations, while the core reading rose to levels last seen more than three decades ago. While higher energy prices began to fall off the reading, food prices, in particular, continued to rise, putting pressure on consumers. Financial markets are anticipating that the bank rate will rise from its current level of 4.5% to at least 5% over the next couple of meetings with some hawkish forecasters suggesting that the BoE will have to go to 5.5% to relieve pressure. price pressures.

The UK gold market took a cue from the inflation report and subsequent higher interest rate hike expectations. Returns rose across the curve to multi-month highs as market participants demanded more risk premiums for their money. The UK’s 2-10 denomination curve has inverted further, warning that the UK is likely heading into recession, in contrast to the IMF’s latest update. The International Monetary Fund (IMF) this week raised its growth forecast for the UK and said a recession is now unlikely. Expert forecasts now point to the UK economy growing by 0.4% in the second quarter, compared to a contraction of 0.6% the Fund predicted in January. The latest UK Standard & Poor’s PMI predicts that the UK economy will expand 0.4% in the second quarter.

British Pound (GBP/USD) Latest: IMF U-Turn, UK PMIs, US Debt Talks

Daily chart of the UK 2 year Golden Dividend

The economic calendar next week shows little in the way of significant UK data or events. However, the US docket shows a few very important releases with the US jobs report picking up next Friday. The US job market remains strong which is one of the reasons why US inflation refuses to make any meaningful move lower.

See all market-moving events and data releases in real time DailyFX calendar

To wrap up next week’s events, the US debt ceiling negotiations enter what is likely to be a home stretch as the X date, June 1, approaches. The latest chatter from the US is that the two sides are now much closer to an agreement, although it remains to be seen if they can reach any agreement in time.

Debt Ceiling Blues, Part 79. What Happens If the US Defaults?

GBP/USD will continue to be influenced by the strength of the US dollar and expectations of increased interest rates in the UK next week. The four-day week is likely to see more volatility in GBP/USD on US data releases and debt ceiling talks. The pair tested and rejected the 1.2300 handle yesterday and today, and while this large number is still in sight, it is logical to expect it to be tested again. Adding to the negative outlook, GBP/USD is now trading below its 20- and 50-day moving averages, although the pair appears to be oversold using the CCI indicator. Cable volatility remains low and looks set to change with all of the data releases and macro events next week.

GBP/USD daily price chart – May 26, 2023

Chart via TradingView

Retail trader signals are mixed

Retail trader data shows that 57.83% of traders are net long with the ratio of long to short traders at 1.37 to 1, the number of traders long is 2.04% less than yesterday and 1.43% less than last week, while the number of traders is down Traders’ net short positions increased by 1.79% compared to yesterday and decreased by 7.38% from last week.

We usually take a view contrarian to crowd sentiment, and the fact that traders are holding on suggests that GBP/USD prices could continue lower. Positioning is less net buying than yesterday but more net buying than last week. A mixture of current feelings and recent changes gives us More contrarian bias in GBPUSD trading.

what is your opinion of GBP/USD Upward or downward? You can let us know via the form at the end of this piece or you can contact the author via Twitter Hahahahahahaha.