GBP and Inflation

July 14 2021

Photo by Alaur Rahman on Pexels.com

Today’s UK Inflation data for June is due for release at 7am London. Economists are expecting an increase to 2.2% month on month, up from May’s 2.1% However, I think the risk is for higher inflation. So a number of 2.3% plus could get the GBP moving up.

But, you have to be careful as to what to buy it against. If you buy GBPUSD you might run into difficulties from the testimony of Jerome Powell, he has to explain his thoughts and possible action to take to control the high US Inflation rate. Yesterday US CPI hit a 13 year high of 5.4%. The GBP may be limited in its upside potential against the USD.

Assuming that the GBP turns bullish I would prefer to buy it against the EUR or CHF.

If we get a miss on the downside then I think you can sell GBPUSD.

GBPUSD

Support is currently at 1.3800/1.3780, if we get a break down from here you will find more support at the recent low of our trading range at 1.3740.

Resistance is now at 1.3850 where a break would likely see another test of 1.3900/20. However, the further upside gains could be limited by the testimony of FOMC Chair Jerome Powell. The outcome depends if has a hawkish shift on US inflation or not.

GBPUSD 20 Pip Chart by http://www.eightdragonscapital.com

GBPCHF

The GBPCHF has spent quite a long time trading around a pivot of 1.2700 with an occasional trip north to 1.2840 or south to 1.2580. Today we find ourselves bang in the middle again at 1.2690.

GBPCHF 20 Pip Chart from http://www.eightdragonscapital.com

If we do see a higher inflation rate in the UK , GBPCHF should break up and provide a buy signal at 1.2720, on its way back to 1.2800 and possibly 1.2840.

However, if we just get an as expected number you will see the continuation of the tight range 1.2670 to 1.2710.

Soft UK inflation data would see a break of 1.2660 and another drop to the bottom of the wider range low at 1.2600/1.2580

contact us at support@8dragonstrade.com

Published by Neil Callard

Forex Trader and Educator. 30 years trading experience, of which 20 years was market making in major currencies in large international financial institutions.

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