Fundamental and Technical Outlook: GBP/USD

Fundamental Outlook: GBP/USD

During the Asia-Pacific session Chinese Industrial Production and Retail Sales data beat estimates at 6.3% and 10.6% versus expectations of 6.1% and 10.1% respectively. Overall price action remained choppy with no clear direction in most pairs along with a mixed picture in equities following the change in risk sentiment in yesterday's New York session.

The main event in today's London session will be UK CPI.

In today’s session we expect the strongest currency to be GBP given overall expectations for a positive CPI release in today's London session. Therefore CPI will be highly influential to this view with a positive deviation providing an opportunity to long GBP.

The weakest currency is expected to be USD following yesterday's overall dovish comments from Fed's Brainard which has consequently reduced expectations for a September Fed hike to just 15% from 24% prior.

The GBPUSD pair is currently priced at 1.3322.

There are several levels including the current price level which can be considered for buying opportunities:

The price levels below could be used to buy from as price retraces into them:

1.3300, 1.3264, 1.3234

The price level below could be used to buy from as price breaks out above:

1.3346

Technical Outlook: GBP/USD



Market Opening Wrap

In Asian Equity Markets stocks rose on Tuesday after Federal Reserve Governor Lael Brainard calmed global markets with remarks that appeared to reduce the prospects of a near-term interest rate hike. MSCI's broadest index of Asia-Pacific stocks outside Japan gained 0.4 percent, after tumbling 2.4 percent on Monday. South Korea's Kospi rose 0.5 percent and Australian stocks advanced 0.1 percent. Hong Kong's Hang Seng added 0.8 percent and Shanghai bucked the trend to lose 0.2 percent. The Nikkei opened slightly higher on the back of Wall Street's rally overnight, but pulled back to be flat at 16,676.74 in midmorning trade. The broader Topix fell 0.3 percent to 1,319.75 and the JPX-Nikkei Index 400 lost 0.3 percent to 11,837.18.

In Currency Markets the dollar inched higher against the yen on Tuesday but remained below the previous day's high, having taken a hit after dovish comments from a Federal Reserve policymaker reduced bets that the Fed would raise interest rates this month. Against the yen, the dollar inched up 0.1 percent to 101.96 yen, after falling 0.8 percent on Monday. The euro was little changed at $1.1234. Sterling held steady at $1.3335, having risen from levels seen at the end of last week when it traded at $1.3270. The Australian dollar traded at 0.7547, down 0.25 percent. The dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.01 percent at 95.13.

In Commodities Markets oil prices fell in early trade on Tuesday on concerns over increased drilling in the United States and as investors took profits after oil prices rose close to 1 percent in the previous session.  Brent crude futures were trading at $47.98 per barrel, down 0.7 percent, from their last settlement. U.S. West Texas Intermediate futures were down 0.9 percent, at $45.88 a barrel. Spot gold was up about 0.3 percent at $1,330.41 an ounce. Spot silver climbed 0.8 percent to $19.21 an ounce, after hitting an over one-week low of $18.69 in the previous session. Platinum was up 0.3 percent at $1,056.80, having marked its lowest in more than two months at $1,033.45 on Monday. Palladium rose 0.8 percent to $665.80.

In US Equity Markets  stocks racked up their strongest gain in two months on Monday after Federal Reserve Board Governor Lael Brainard stuck to her dovish stance on interest rates and urged caution about removing monetary stimulus too quickly. The Dow rallied 1.32 percent to end at 18,325.07 points and the S&P 500  jumped 1.47 percent to 2,159.04. The Nasdaq Composite rose 1.68 percent to 5,211.89. Apple  rose 2.24 percent, giving the S&P 500 its largest boost. Perrigo jumped 7.34 percent after activist investor Starboard Value disclosed a stake in the drugmaker and said it must make improvements to revive its stock. The CBOE Volatility Index was down 14.11 percent to 15.03.

In Bond Markets the U.S. Treasury yield curve was the steepest in over a month on Monday after Federal Reserve Governor Lael Brainard said the U.S. central bank should avoid removing support for the economy too quickly. Benchmark 10-year notes gained 1/32 in price to yield 1.670 percent, after rising earlier on Monday to 1.697 percent, the highest since June 24.

Source: Institute of Trading and Portfolio Management