Published on Jun 13, 2023

Daily Analysis For GBP/USD 13-06-2023

GBP/USD Analysis

Key Points: -

· Following the release of positive UK Employment data, GBP/USD has made a strong recovery and is now trading near 1.2550.

· The UK Claimant Count Change has decreased by 13.6K, and the unemployment rate has dropped to 3.8%.

· It is expected that the US headline Consumer Price Index (CPI) will slow down to 0.2%, while core inflation is likely to remain steady at 0.4%.

Today's Scenario: -

The GBP/USD pair has experienced a positive boost following the release of better-than-expected labor market data by the United Kingdom's Office for National Statistics (ONS) for May. The Claimant Count Change has decreased by 13.6K, surpassing the market's expectation of a decline of 9.6K. In the previous month, the Claimant Count Change had increased by 23.4K. Additionally, the three-month Unemployment Rate for April has declined to 3.8%, lower than the estimated 4.05% and the previous figure of 3.9%.

It is noteworthy that Average Earnings, excluding bonuses, have seen a significant increase of 6.5%, surpassing both market consensus and the previous release of 6.1%. The Bank of England (BoE) has been closely monitoring the rise in earnings as it grapples with persistent inflationary pressures.

UK companies have been facing labor shortages, with Brexit and early retirements contributing to the challenges. To address these shortages, companies have resorted to higher wage payouts.

Considering the resilience exhibited by the UK Employment data, BoE Governor Andrew Bailey is likely to opt for further policy tightening, increasing interest rates by 25 basis points (bps) to 4.75%.

In the Asian session, S&P 500 futures have shown significant gains, reflecting the market's interest in US equities. Investors are hopeful that the Federal Reserve (Fed) will refrain from raising interest rates at this time. However, it should be noted that a hawkish stance cannot be ruled out, given that the inflation rate still exceeds the desired target of 2%.

Ahead of the Fed policy decision, market participants will closely watch the United States Consumer Price Index (CPI) data. The monthly headline inflation for May is expected to grow at a pace of 0.2%, slower than the 0.4% recorded in April. However, the monthly pace of core CPI, which excludes oil and food prices, is anticipated to remain steady at 0.4%.

Diagram of GBP/USD: -

Economic Events: -

Date Event Impact Currency

4:15 (New Zealand) Visitor Arrivals YoY Low NZD

5:20 (Japan) BSI Large Manufacturing QoQ Low JPY

6:00 (Australia) Westpac Consumer Confidence Change High AUD

6:00 (Australia) Westpac Consumer Confidence Index High AUD

7:00 (Australia) NAB Business Confidence High AUD

11:30 (Germany) Harmonised Inflation Rate MoM Low EUR

11:30 (Germany) Harmonised Inflation Rate YoY Low EUR

11:30 (Germany) Inflation Rate MoM Medium EUR

11:30 (Germany) Inflation Rate YoY Medium EUR

11:30 (Germany) CPI High EUR

11:30 (United Kingdom) Average Earnings excl. Bonus (3Mo/Yr) Low GBP

11:30 (United Kingdom) Average Earnings incl. Bonus (3Mo/Yr) Medium GBP

11:30 (United Kingdom) Unemployment Rate High GBP

11:30 (United Kingdom) Claimant Count Change High GBP

11:30 (United Kingdom) Employment Change High GBP

11:30 (United Kingdom) HMRC Payrolls Change Low GBP

12:30 (Lithuania) Current Account Low EUR

12:30 (Spain) CPI High EUR

12:30 (Spain) Core Inflation Rate YoY Low EUR

12:30 (Spain) Harmonised Inflation Rate MoM Low EUR

12:30 (Spain) Harmonised Inflation Rate YoY Low EUR

12:30 (Spain) Inflation Rate MoM Low EUR

12:30 (Spain) Inflation Rate YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

14:10 (Spain) 3-Month Letras Auction Low EUR

14:30 (Euro Area) ZEW Economic Sentiment Index Medium EUR

14:30 (Germany) ZEW Economic Sentiment Index High EUR

14:30 (Germany) ZEW Current Conditions Low EUR

14:30 (United Kingdom) 10-Year Treasury Gilt Auction Low GBP

14:40 (Italy) 3-Year BTP Auction Low EUR

14:40 (Italy) 7-Year BTP Auction Low EUR

14:40 (Italy) 30-Year BTP Auction Low EUR

15:00 (Germany) 5-Year Bobl Auction Low EUR

15:15 (Euro Area) ECB Enria Speech Low EUR

15:30 (Latvia) Current Account Low EUR

15:30 (United States) NFIB Business Optimism Index Low USD

17:30 (Ecuador) Balance of Trade Low USD

18:00 (United States) Core Inflation Rate MoM Medium USD

18:00 (United States) Inflation Rate MoM High USD

18:00 (United States) Core Inflation Rate YoY High USD

18:00 (United States) Inflation Rate YoY High USD

18:00 (United States) CPI High USD

18:00 (United States) CPI s.a High USD

18:15 (Germany) Current Account Low EUR

18:25 (United States) Redbook YoY Low USD

19:30 (United Kingdom) BoE Gov Bailey Speech Medium GBP

20:30 (United Kingdom) BoE Dhingra Speech Low GBP

21:00 (United States) 52-Week Bill Auction Low USD

22:30 (United States) 30-Year Bond Auction Low USD

Buy Scenario: -

From a technical standpoint, the rebound of the Cable pair from the support of the short-term DMA at 1.2488 is supported by a positive oscillator, attracting short-term buyers. Nevertheless, the upper boundary of the aforementioned bullish channel, located around 1.2610, serves as a resistance level for further upside movement in the GBP/USD pair.

It is worth noting that several obstacles encountered since late April also pose challenges for GBP/USD bulls around 1.2580.

Even if buyers manage to surpass the mentioned resistance at 1.2610, the yearly high recorded in May around 1.2680 is the final hurdle for the bears. Till we do not advise to buy GBP/USD.

Sell Scenario: -

On the downside, a break below the 10-DMA could quickly lead GBP/USD towards the lower boundary of the mentioned channel, currently near 1.2430. However, an upward-sloping support line originating from early March, located near 1.2420, acts as a potential entry point for sellers. Till then we do not advise selling GBP/USD.