British Pound (GBP) Forecast – GBP/USD Gains Ahead of Important Data Release
GBP/Price, chart and analysis in USD
- UK 10-year bond yields are near recent highs but remain firm.
- US CPI and UK GDP will drive GBP/USD in the near term.
Cable (GBP/USD) gains in early trading, helped by a slightly weaker US dollar and a dovish UK gilt complex, ahead of two major data releases later in the week. The benchmark UK 10-year gilt is trading with a yield of 1.435%, down from the multi-year high of 1.50% reached on Tuesday, but still nearly 50 basis points higher on the year. The gilt market has forecast a series of further rate hikes in the UK over the past few weeks, which is supporting the pound against a range of other currencies.
The Bank of England’s 25bp rate hike last week to 0.50% is expected to be followed by a further 25bp hike at the next MPC meeting in March, with further hikes expected throughout the year as the central bank grapples with a multi-decade high. inflation rate (5.4%). At the last MPC meeting, the BoE said inflation could reach over 7% in the near term. Rates markets are now forecasting a discount rate of 1.5% by the end of 2022.
In the short term, Cable will be moved by the latest look at US inflation on Thursday (13:30 GMT) and UK GDP figures for December to be released on Friday (07:00 GMT). Both releases should be watched closely by GBP/USD traders.
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The outlook for GBP/USD remains mixed on the daily chart with a streak of lower highs still in place, while the recent streak of lower lows was broken in late January. The pair is trapped in the middle of the three simple moving averages, adding to the mixed outlook. Initial resistance is seen around 1.3630 while support is seen at 1.3515.
GBP/USD Daily Price Chart – February 9, 2022
Retail merchant data shows 54.26% of traders are net-long with a ratio of long to short traders of 1.19 to 1. The number of net long traders is 6.66% higher than yesterday and 7.89% higher than last week, while the number of net short traders is 1.02% lower than yesterday. yesterday and 2.10% lower than last week.
We generally take a contrarian view of crowd sentiment, and the fact that traders are net buyers suggests that GBP/USD prices may continue lower. Traders are sharper than yesterday and last week, and the combination of current sentiment and recent changes gives us a a stronger contrarian GBP/USD-bearish trading bias.
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