POUND STERLING ANALYSIS & TALKING POINTS
- Where to next for UK services PMI?
- BoE market pricing overexuberant?
- Subdued GBP/USD price action expected today.
GBPUSD FUNDAMENTAL BACKDROP
Today’s US holiday (Independence Day) will likely see the British pound relatively muted alongside no significant economic data. The calendar below shows tomorrow holds more volatility stoking news including UK services PMI’s, Fed speak and the FOMC Minutes respectively. Non-manufacturing data will be closely monitored as services outline roughly 75% of the UK’s economy making it a key gauge to assess the overall trajectory of the UK economy.
UK ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
Implied rates (refer to table below) for the Bank of England (BoE)’s forthcoming interest rates remain firm in their expectation for yet another 50bps hike with cumulative rate hikes estimated around 125bps by December 2023. Markets clearly view the inflationary pressures through an extremely hawkish lens leaving room for a dovish surprise in my view. Any upcoming data pointing to a weaker economy and declining inflation could hurt the pound after a strong start to the first half of 2023 against the greenback.
BANK OF ENGLAND INTEREST RATE PROBABILITIES
Source: Refinitiv
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TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily cable chart above has GBP/USD shows the 1.2680 swing support handle holding but with minimal data for today coupled with an absence of US trade, cable will likely remain muted/rangebound.
Key resistance levels:
- 1.2813
Key support levels:
- 1.2680
- 1.2584
BEARISH IG CLIENT SENTIMENT
IG Client Sentiment Data (IGCS) shows retail traders are currently net SHORT on GBP/USD with 56% of traders holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive a at a short-term downside disposition.
Contact and followWarrenon Twitter:@WVenketas
