GBP/USD – Pound Shrugs as CPI Dips

The British pound has edged lower in the Tuesday session. In North American trade, GBP/USD is trading at 1.4012, down 0.22% on the day. On the release front, British CPI dropped to 2.7%, down from 3.0% a month earlier. The reading fell shy of the estimate of 2.8%, and marked a 7-month low. There are no US events on the schedule. On Wednesday, the US releases Current Account and Existing Home Sales. As well, the Federal Reserve is expected to raise interest rates for the first time in 2018.

British inflation remains high, but CPI, the primary gauge of consumer inflation, dropped in February. This is good news for consumers, who have seen their purchasing power steadily deteriorate, with inflation levels of around 3% in recent months. Still, the Bank of England is expected to raise rates at the May meeting, even with the drop in inflation.

After months of rough rhetoric between Britain and the EU, the two sides announced that there would be a transition period following the UK’s departure from the EU in March 2019. The transition deal will kick in at that time, lasting until December 2020. The deal covers the rights and status of EU citizens in the UK and British citizens in the EU, and allows the UK to pursue new trade agreements during that time. There are still some issues to iron out, such as the Northern Ireland border. The transition period is a major, positive development, in that it will enable Britain to enjoy the benefits of the common market, albeit without a seat at the table.

Sterling Strong Despite Weaker Inflation

GBP/USD Fundamentals

Tuesday (March 20)

  • 5:30 British CPI. Estimate 2.8%. Actual 2.7%
  • 5:30 British PPI Input. Estimate -0.9%. Actual -1-1%
  • 5:30 British Core CPI. Estimate 2.5%. Actual 2.4%
  • 5:30 British HPI. Estimate 5.1%. Actual 4.9%
  • 5:30 British PPI Output. Estimate 0.1%. Actual 0.0%
  • 5:30 British RPI. Estimate 3.7%. Actual 3.6%

Wednesday (March 21)

  • 5:30 British Average Earnings Index. Estimate 2.6%
  • 5:30 British Claimant Count Change. Estimate -3.1K
  • 5:30 British Public Sector Net Borrowing. Estimate -0.4B
  • 5:30 British Unemployment Rate. Estimate 4.4%
  • 8:30 US Current Account. Estimate -125B
  • 10:00 US Existing Home Sales. Estimate 5.41M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.75%
  • 14:30 US FOMC Press Conference

*All release times are GMT

*Key events are in bold

GBP/USD for Tuesday, March 20, 2018

GBP/USD March 20 at 12:30 EDT

Open: 1.4025 High: 1.4067 Low: 1.3982 Close: 1.3996

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3809 1.3901 1.4010 1.4128 1.4227 1.4345

GBP/USD ticked higher in the Asian session. In European trade, the pair moved higher but then reversed directions and headed lower. The pair has shown limited movement in the North American session

  • 1.4010 was tested earlier in support and is under pressure
  • 1.4128 is the next resistance line
  • Current range: 1.4010 to 1.4128

Further levels in both directions:

  • Below: 1.4010, 1.3901, 1.3809 and 1.3744
  • Above: 1.4128, 1.4227 and 1.4345

OANDA’s Open Positions Ratio

In the Tuesday session, GBP/USD ratio is showing short and long positions as evenly split, indicative of a lack of bias towards the direction of the pair.

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.