GBP/USD – Pound edges higher, CPI and Fed statement next

GBP/USD is up slightly in the Tuesday session. In North American trade, the pair is trading at 1.2643, up 0.24% on the day. Earlier in the day, the pair punched above the 1.27 line for the first time in a week. On the release front, there are no British events. In the U.S.,  housing numbers improved in November. Building Permits jumped to 1.33 million, up from 1.27 million in October. Housing starts climbed 1.26 million, compared to 1.23 million a month earlier. Both readings beat their estimates. On Wednesday, the U.K. releases CPI which is expected to edge lower to 2.3%. The markets will be keeping a close eye on the Federal Reserve, which is expected to raise the benchmark rate by a quarter-point.

The markets are predicting that the Federal Reserve will raise interest rates on Wednesday, but this could be the last rate hike until well into 2019. The Fed has already raised rates three times this year, a testament to the strong U.S. economy. Just one week ago. the CME Group had set the odds of rate hike at 80%, but this has fallen to 69%. A key factor in the drop is the latest equity sell-off. The week started poorly, as the S&P fell on Monday to its lowest level since October 2017. Rate hikes are unusual when stock markets are swooning, so traders should be prepared for the Fed to send a dovish message to the markets, along with a quarter-point rate hike. This could send the dollar downwards on Wednesday.

Brexit continues to spook investors and sent the pound on a roller-coaster ride last week, as GDP/USD moved 1 percent on two separate days. The volatility was in response to last week’s dramatic events surrounding Brexit. Prime Minister Theresa May survived an internal non-confidence motion in the Conservative party. However, one-third of Conservative MPs voted against May, leaving the prime minister in a weak position, ahead of a parliamentary vote on Brexit, which will likely be held in January.

The EU has insisted that the withdrawal agreement will not be reopened, and May was unable to extract any concessions from the EU on a whirlwind trip last week. May will have a tough time pushing the deal through parliament, and if she is not successful, Britain could well be on its way to leaving the EU without a deal, which would have a chilling effect on the U.K. economy and the British pound.

Housing Starts and Building Permits Rise

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GBP/USD Fundamentals

Tuesday (December 18)

• 8:30 US Building Permits. Estimate 1.27M
• 8:30 US Housing Starts. Estimate 1.23M

Wednesday (December 19)

• 4:30 British CPI. Estimate 2.3%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <2.50%
• 14:30 US FOMC Press Conference

*All release times are EST

*Key events are in bold

GBP/USD for Tuesday, December 18, 2018

GBP/USD December 18 at 11:50 EST

Open: 1.2615 High: 1.2706 Low: 1.2610 Close: 1.2644

GBP/USD Technical

GBP/USD ticked higher in the Asian session and posted strong gains in European trade. The pair has reversed directions in North American trade and given up some of these gains

• 1.2589 is providing support
• 1.2706 is the next resistance line
• Current range: 1.2589 to 1.2706

Further levels in both directions:

• Below: 1.2589, 1.2488, 1.2365 and 1.2229
• Above: 1.2706, 1.2812 and 1.2915

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