Published on Jun 15, 2023

Daily Analysis For GBP/USD 15-06-2023

GBP/USD Analysis

Key Points: -

· The GBP/USD currency pair encountered selling pressure on Thursday, influenced by a slight uptick in the US Dollar.

· The US Dollar received support from the Federal Reserve's indication that interest rates will increase by an additional 50 basis points (bps) in 2023.

· Expectations of a more aggressive tightening of monetary policy by the Bank of England (BoE) should help restrict losses for the major currency pair.

Today's Scenario: -

During the Asian session on Thursday, the GBP/USD pair slightly declines, moving further away from its highest level since April 2022, which was reached around the 1.2700 level the previous day. Currently trading just below the mid-1.2600s, the pair is down approximately 0.15% for the day. However, the overall fundamental backdrop still favors bullish traders.

The US Dollar (USD) strengthens slightly and seeks to build upon its overnight rebound from a one-month low. This upward movement acts as a headwind for the GBP/USD pair. The modest increase in the USD can be attributed to the Federal Reserve's (Fed) hawkish stance and their intention to resume the cycle of raising interest rates. The Fed signaled that borrowing costs will rise by an additional 50 basis points (bps) by the end of December. During the post-meeting press conference, Fed Chair Jerome Powell stated that the decision to pause the rate hikes was a cautious approach to gather more information before determining the need for further rate increases.

Furthermore, Powell expressed that the US economy and job market are performing better than anticipated. This statement increases market expectations for a 25 bps rate hike at the July Federal Open Market Committee (FOMC) policy meeting, which attracts buyers to the USD. However, the downside for the GBP/USD pair is cushioned by the belief among market participants that the Bank of England (BoE) will pursue a more aggressive policy tightening approach to control persistently high inflation. This belief was reinforced by positive UK jobs data released on Tuesday, which revealed near-record wage growth and a lower unemployment rate.

As a result, the path of least resistance for the GBP/USD pair appears to be to the upside, supporting the potential for an extension of the recent upward trend observed over the past three weeks. Traders are now turning their attention to the US economic calendar, which includes the release of monthly Retail Sales, the usual Weekly Initial Jobless Claims, the Empire State Manufacturing Index, the Philly Fed Manufacturing Index, and Industrial Production figures. This data could influence the price dynamics of the USD later in the early North American session, presenting short-term trading opportunities around the major currency pair.

Diagram of GBP/USD: -

Economic Events: -

Date Event Impact Currency

0:00 (United States) Fed Press Conference High USD

4:15 (New Zealand) GDP Growth Rate YoY Medium NZD

4:15 (New Zealand) GDP Growth Rate QoQ Medium NZD

5:20 (Japan) Foreign Bond Investment Low JPY

5:20 (Japan) Stock Investment by Foreigners Low JPY

5:20 (Japan) Machinery Orders YoY Medium JPY

5:20 (Japan) Machinery Orders MoM Medium JPY

5:20 (Japan) Imports YoY Low JPY

5:20 (Japan) Balance of Trade High JPY

5:20 (Japan) Exports YoY Medium JPY

5:30 (Euro Area) Eurogroup Meeting Medium EUR

7:00 (Australia) Consumer Inflation Expectations Low AUD

7:00 (Australia) Part Time Employment Chg Medium AUD

7:00 (Australia) Participation Rate Low AUD

7:00 (Australia) Full Time Employment Chg Medium AUD

7:00 (Australia) Unemployment Rate High AUD

7:00 (Australia) Employment Change High AUD

7:00 (Australia) RBA Bulletin Medium AUD

7:00 (China) PBoC 1-Year MLF Announcement Low CNY

7:00 (China) House Price Index YoY Medium CNY

7:30 (China) Unemployment Rate High CNY

7:30 (China) Retail Sales YoY High CNY

7:30 (China) Industrial Production YoY High CNY

7:30 (China) Fixed Asset Investment (YTD) YoY Medium CNY

9:05 (Japan) 3-Month Bill Auction Low JPY

10:00 (Japan) Tertiary Industry Index MoM Low JPY

10:00 (Netherlands) Unemployment Rate Medium EUR

10:30 (Finland) GDP YoY Low EUR

12:00 (Switzerland) Producer & Import Prices MoM Low CHF

12:00 (Switzerland) Producer & Import Prices YoY Low CHF

12:15 (France) Inflation Rate MoM Medium EUR

12:15 (France) Inflation Rate YoY Medium EUR

12:15 (France) Harmonised Inflation Rate MoM Low EUR

12:15 (France) Harmonised Inflation Rate YoY Low EUR

13:30 (Spain) Balance of Trade Medium EUR

14:10 (Spain) Obligacion Auction Low EUR

14:10 (Spain) Bonos Auction Low EUR

14:30 (Euro Area) Balance of Trade Medium EUR

14:30 (France) 5-Year OAT Auction Low EUR

14:30 (France) 3-Year OAT Auction Low EUR

14:30 (Greece) Construction Output YoY Low EUR

14:30 (Montenegro) Inflation Rate YoY Low EUR

14:30 (Montenegro) Harmonised Inflation Rate YoY Low EUR

14:30 (Montenegro) Inflation Rate MoM Low EUR

15:00 (Belgium) Construction Output YoY Low EUR

15:30 (France) 10-Year Index-Linked OAT Auction Low EUR

15:30 (Ireland) Balance of Trade Low EUR

16:00 (Portugal) Economic Activity YoY Low EUR

16:00 (Portugal) Private Consumption YoY Low EUR

17:45 (Canada) Housing Starts Medium CAD

17:45 (Euro Area) ECB Interest Rate Decision High EUR

17:45 (Euro Area) Marginal Lending Rate Low EUR

17:45 (Euro Area) Deposit Facility Rate High EUR

18:00 (Canada) Manufacturing Sales MoM Low CAD

18:00 (United States) Import Prices YoY Low USD

18:00 (United States) Export Prices YoY Low USD

18:00 (United States) Import Prices MoM Medium USD

18:00 (United States) Export Prices MoM Medium USD

18:00 (United States) NY Empire State Manufacturing Index Medium USD

18:00 (United States) Retail Sales YoY High USD

18:00 (United States) Retail Sales Ex Autos MoM High USD

18:00 (United States) Retail Sales MoM High USD

18:00 (United States) Philly Fed Business Conditions Low USD

18:00 (United States) Philly Fed Employment Low USD

18:00 (United States) Philly Fed CAPEX Index Low USD

18:00 (United States) Philly Fed Prices Paid Low USD

18:00 (United States) Philly Fed New Orders Low USD

18:00 (United States) Philadelphia Fed Manufacturing Index Medium USD

18:00 (United States) Jobless Claims 4-week Average High USD

18:00 (United States) Continuing Jobless Claims High USD

18:00 (United States) Initial Jobless Claims High USD

18:00 (United States) Retail Sales Ex Gas/Autos MoM High USD

18:15 (Euro Area) ECB Press Conference High EUR

18:30 (Belgium) Balance of Trade Low EUR

18:30 (Kosovo) GDP Growth Rate YoY Low EUR

18:45 (United States) Capacity Utilization Low USD

18:45 (United States) Manufacturing Production YoY Low USD

18:45 (United States) Industrial Production YoY Medium USD

18:45 (United States) Industrial Production MoM Medium USD

18:45 (United States) Manufacturing Production MoM Low USD

19:30 (United States) Business Inventories MoM Medium USD

19:30 (United States) Retail Inventories Ex Autos MoM Low USD

20:00 (United States) EIA Natural Gas Stocks Change Low USD

21:00 (United States) 8-Week Bill Auction Low USD

21:00 (United States) 4-Week Bill Auction Low USD

21:05 (United Kingdom) BoE Cunliffe Speech Low GBP

21:30 (Canada) 2-Year Bond Auction Low CAD

21:30 (United States) 15-Year Mortgage Rate Low USD

21:30 (United States) 30-Year Mortgage Rate Low USD

Buy Scenario: -

For the Pound to maintain its upward momentum, it needs to stay above the pivotal level of 1.2655 and aim for the First Major Resistance Level (R1) at 1.2710. If the Pound manages to surpass Wednesday's high of 1.2674, it would indicate a continuation of the breakout trend. However, this would require positive economic indicators from both the UK and the US, as well as support from the Federal Reserve (Fed), to sustain the breakout.

In the event of a strong rally, the GBP/USD pair would likely test the Second Major Resistance Level (R2) at 1.2753, with the Third Major Resistance Level (R3) located at 1.2808. Till we do not advise to buy GBP/USD.

Sell Scenario: -

On the downside, if the Pound falls below the pivot level, it could target the First Major Support Level (S1) at 1.2612. However, unless there is a significant sell-off fueled by the Fed, it is expected that the GBP/USD pair will remain above the key level of $1.26 and the Second Major Support Level (S2) at 1.2558. The Third Major Support Level (S3) is situated at 1.2514. Till then we do not advise selling GBP/USD.