GBP/USD – British pound shrugs off soft housing inflation

The British pound has posted slight gains in the Monday session. In North American trade, the pair is trading at 1.2786, up 0.28% on the day. On the release front, British Rightmove HPI dropped 2.3%, its sharpest decline since December. There are no data releases out of the U.S.

U.S consumer data has been strong and helped fuel the booming economy, so a soft consumer confidence report on Friday surprised the markets. The UoM Consumer Sentiment report dropped from 97.1 to 95.3, well below the estimate of 98.1 points. This marked the indicator’s lowest level since January. One reason for the weak report is stronger inflation in the U.S., which has led to higher prices and resulted in less favorable buying conditions. Still, with a tight labor market and strong economic conditions, the markets will be hoping that the weak release is a one-time blip and that consumer spending remains strong in the third quarter.

The U.S dollar has recorded broad gains in August, including 2.6% against the British pound. Much of the greenback’s strength has been a result of the escalating trade war, with President Trump slapping stiff tariffs on a host of trading partners, in particular, China. However, after months of an escalating global trade war, there is hope that tensions will subside, as the U.S and China are holding low-level trade talks this week in Washington. Although a dramatic breakthrough is unlikely, the fact that the two sides are talking has investors cheering. The U.S is unhappy with the Chinese protection of local markets and technology transfers required in order for U.S businesses to operate in China, but it’s questionable if the Chinese will show much flexibility. Both sides have slapped tariffs of $34 billion on each other’s products, with another $16 billion in tariffs scheduled for August 23. If the negotiations lead to the suspension of the upcoming tariffs, risk appetite would rise and likely see the US dollar give back some of its recent gains.

GBP/USD Fundamentals

Sunday (August 19)

• 19:01 US British Rightmove HPI. Actual -2.3%

Monday (August 20)

• 11:00 US FOMC Member Rafael Bostic Speaks

*All release times are DST

*Key events are in bold

GBP/USD for Monday, August 20, 2018

GBP/USD August 20 at 13:55 DST

Open: 1.2750 High: 1.2789 Low: 1.2730 Close: 1.2786

GBP/USD Technical

GBP/USD was flat in the Asian session. The pair posted small gains in European trade and has posted more gains in North American trade

• 1.2706 is providing support
• 1.2852 is the next resistance line
• Current range: 1.2706 to 1.2852

Further levels in both directions:

• Below: 1.2706, 1.2589 and 1.2366
• Above: 1.2852, 1.2996 and 1.3088

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