GBP/USD Helped By Upbeat Sentiment & Higher Inflation
Optimism Around Ukraine
Fears of a Russian invasion in Ukraine eased yesterday, after the country's Ministry of Defense announced that "The units of the Southern and Western military districts, having completed their tasks, have already begun loading onto rail and road transport and will begin moving to their military garrisons today." [1]
Later in the day, Russian President Putin said he does not want war in Europe, but noted that there has not been no meaningful constructive response to Russia's proposals, during a joint press conference with German Chancellor Olaf Scholz. [2]
US President Biden said that the announced withdrawal of Russian troops has not been verified and that an invasion "remains distinctly possible".[3]
UK Inflation
Today's data showed that Headline CPI Inflation rose by 5.5% year-over-year in January, from 5.4% in the prior month, marking the highest level since March 1992.
Surging Inflation has led the Bank of England (BoE) to deliver two back-to-back rate hikes in its last two meetings (December and February), while governor Bailey said that "It is likely that, you know, we will have, we will raise rates again. I think its more likely than not", speaking on BloombergTV after the latest rate increase. [4]
The case for a third straight hike strengthens after today's data and yesterday's rise in average weekly wages (by 4.3% 3m/y in December) – an area of concern for the BoE. The central bank expect the Consumer Price Index (CPI) to peak at 7.25% in April.
GBP/USD
The pair benefits from broader upbeat sentiment and today's CPI data, trying to move beyond its 200Day EMA that would allow it to contest this month's highs (1.3621), but we are cautious at this stage around its ascending prospects beyond that level and towards the 2022 high (1.3749).
On the other hand, GBP/USD has failed multiple times above the EMA200 recently and has been having a cautious couple of weeks. As such, it remains vulnerable to 1.3500, but this area has been supportive, while the Daily Ichimoku Cloud has the potential to contain further selling pressure.
Caution is needed as market digest news around Ukraine and ahead of the Fed minutes form the last monetary policy decision and some high profile economic releases from the US.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 16 Feb 2022 https://eng.mil.ru/en/news_page/country/more.htm | |
| Retrieved 16 Feb 2022 https://www.youtube.com/watch | |
| Retrieved 16 Feb 2022 https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/02/15/remarks-by-president-biden-providing-an-update-on-russia-and-ukraine/ | |
| Retrieved 03 Jul 2022 https://twitter.com/BloombergTV/status/1489307478894559233 |
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