Published on Jun 16, 2023

Daily Analysis For GBP/USD 16-06-2023

GBP/USD Analysis

Key Points: -

· GBP/USD is currently experiencing a lack of clear direction, struggling at the highest levels seen since April 2022, and ending a three-day uptrend.

· The previous support for Cable bulls was driven by a weaker US Dollar and hawkish expectations from the Bank of England (BoE), while doubts surrounding the Federal Reserve's July rate hike added further support.

· The market is currently consolidating its weekly performance, and there is a cautious mood among Pound Sterling traders ahead of key data releases from both the UK and the US.

Today's Scenario: -

GBP/USD is currently stabilizing near its highest level in 14 months, hovering around 1.2780-70 in early Friday morning trading in London. Traders of the Cable pair are awaiting further clues to support the significant rally witnessed in the previous day. The Pound Sterling experienced its most significant gain in a week, rising for the third consecutive day to reach a multi-month high. This surge was primarily driven by broad weakness in the US Dollar and concerns about a more hawkish stance from the Bank of England (BoE).

Earlier in the week, a mixed set of economic data from the UK failed to dampen the bullish sentiment surrounding GBP/USD, as market participants remained focused on the BoE's potential hawkishness, particularly in light of the previously positive inflation figures. The UK's Gross Domestic Product (GDP) for April showed growth in line with expectations at 0.2%, compared to a decline of 0.3% in the previous reading. However, both Industrial Production and Manufacturing Production disappointed, along with the Index of Services for the three months leading up to April.

Meanwhile, the US Dollar Index (DXY) has seen some buying interest, recovering from its largest daily loss in three months to trade around 102.30. This recovery has provided some support for Pound Sterling buyers. However, GBP/USD experienced significant losses the previous day due to mixed US data and market uncertainty regarding the Federal Reserve's planned rate hike in July, despite the central bank's statements confirming such intentions on Wednesday.

In terms of recent US data, May's Retail Sales figures exceeded expectations with a growth rate of 0.3% compared to an anticipated decline of 0.1%, while Core Retail Sales matched forecasts at 0.1%. Additionally, the NY Fed Empire State Manufacturing Index surged to 6.6 in June, surpassing expectations, while the Philadelphia Fed Manufacturing Index dropped to -13.7 for the same month. US Industrial Production for May fell short of estimates at -0.2% versus an expected 0.1%, and Initial Jobless Claims came in slightly higher than expected at 262K for the week ending June 9.

Given the current landscape, market participants appear more optimistic about the Bank of England's outlook compared to the Federal Reserve's, which keeps GBP/USD on the radar of bullish traders despite its recent pullback.

Looking ahead, the release of UK's Consumer Inflation Expectations for June will precede the preliminary readings of the Michigan Consumer Sentiment Index (CSI) and five-year inflation expectations for the same month. These releases will likely influence intraday movements of GBP/USD.

Diagram of GBP/USD: -

Economic Events: -

Date Event Impact Currency

01:30 (United States) Foreign Bond Investment Low USD

01:30 (United States) Net Long-term TIC Flows Medium USD

01:30 (United States) Overall Net Capital Flows Low USD

04:00 (New Zealand) Business NZ PMI Medium NZD

08:30 (Japan) BoJ Interest Rate Decision High JPY

12:30 (Austria) Inflation Rate MoM Low EUR

12:30 (Austria) Inflation Rate YoY Low EUR

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

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

12:30 (Austria) CPI High EUR

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

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

12:30 (United States) Fed Bullard Speech Medium USD

13:30 (European Union) ECOFIN Meeting Medium EUR

13:30 (Italy) Inflation Rate YoY Medium EUR

13:30 (Italy) Harmonised Inflation Rate MoM Low EUR

13:30 (Italy) Harmonised Inflation Rate YoY Low EUR

13:30 (Italy) Inflation Rate MoM Low EUR

13:30 (Italy) CPI High EUR

14:30 (Euro Area) Inflation Rate MoM Low EUR

14:30 (Euro Area) Core Inflation Rate YoY Low EUR

14:30 (Euro Area) Inflation Rate YoY Medium EUR

14:30 (Euro Area) Labour Cost Index YoY Low EUR

14:30 (Euro Area) Wage Growth YoY Low EUR

14:30 (Euro Area) CPI High EUR

14:30 (Malta) Inflation Rate YoY Low EUR

15:30 (Portugal) PPI YoY Low EUR

15:30 (Portugal) PPI MoM Low EUR

17:15 (United States) Fed Waller Speech Medium USD

18:00 (Canada) Foreign Securities Purchases Low CAD

18:00 (Canada) Foreign Securities Purchases by Canadians Low CAD

18:00 (Canada) Wholesale Sales MoM Low CAD

19:30 (United States) Michigan Consumer Sentiment High USD

19:30 (United States) Michigan Inflation Expectations Low USD

19:30 (United States) Michigan Current Conditions Low USD

19:30 (United States) Michigan 5 Year Inflation Expectations Low USD

19:30 (United States) Michigan Consumer Expectations Low USD

22:30 (United States) Baker Hughes Oil Rig Count Low USD

22:30 (United States) Baker Hughes Total Rig Count Low USD

Buy Scenario: -

After surpassing the 1.2700 level, GBP/USD faces the next resistance at last year's April 26 high of 1.2772. If this level is breached, it opens up the path towards the 1.28 handle. Further resistance can be found at the April 25 high of 1.2843 and the April 13 low of 1.2972. Till we do not advise to buy GBP/USD.

Sell Scenario: -

On the other hand, if GBP/USD falls below 1.2700, it would expose the May 10 high at 1.2679 before potentially dipping towards the 1.2600 level. Additional downside risks lie at the 20-day Exponential Moving Average (EMA) at 1.2521, followed by a test of the June 12 low of 1.2487. Till then we do not advise selling GBP/USD.