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GBP/USD – Pound Moves Higher Ahead of CPI

GBP/USD has started the week with gains in the Monday session, following four consecutive losing sessions. In North American trade, the pair is trading at 1.2650. On the release front, it’s an uneventful day, with no major releases out of the UK or the US. On Tuesday, the UK releases CPI, with the markets expecting the index to improve to 1.1 percent.

Britain’s trade deficit improved in October, narrowing to GBP -9.7 billion, beating the forecast of GBP -11.9 billion. This marked the smallest deficit since September 2015.  We’ll get a look at British inflation indicators, highlighted by CPI. Inflation has moved higher in recent months, bolstered by the sharp descent of the British pound, which has lost 15 percent of its value since the Brexit vote in June. With inflation levels moving closer to the BoE’s target of 2.0 percent, many analysts are predicting that the bank could raise interest rates early next year.

BoE More Likely to Hike Than Cut Next [1]

The Federal Reserve will be in the spotlight this week, as the Fed meets for its monthly policy meeting. This will be the first meeting after Donald Trump’s election as president. More importantly of course, the markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback. With Trump taking the reins in government in January, it will be interesting to see what happens early next year. Trump has stated that he plans to increase government spending and cut taxes, which could lead to higher inflation levels. The Fed has indicated that it plans to raise rates gradually in 2017, but this could change once the new administration’s economic policies become clearer.

GBP/USD Fundamentals

Sunday (December 11)

Monday (December 12)

Upcoming Key Events

Tuesday (December 13)

*All release times are EST

* Key events are in bold

GBP/USD for Monday, December 12, 2016

GBP/USD December 12 at 10:40 EST

Open: 1.2591 High: 1.2669 Low: 1.2566 Close: 1.2652

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2351 1.2471 1.2620 1.2778 1.2849 1.2946

Further levels in both directions:

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Monday session. Currently, long positions have a majority (59%), indicative of trader bias towards GBP/USD continuing to move upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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