GBP/USD – Pound yawns as British CPI slips below 2.0%

GBP/USD is almost unchanged in the Wednesday session. In North American trade, the pair is trading at 1.2882, down 0.10% on the day. On the release front, inflation levels were soft on both sides of the pond. In the U.K., headline inflation dipped to 1.8%, shy of the estimate of 1.9%. In the U.S., CPI ticked up to 0.0%, shy of the estimate of 0.1%. Core CPI posted a gain of 0.2%, matching the estimate. On Thursday, the U.S. publishes retail sales and PPI.

British CPI slowed to 1.8% in January, falling below the 2.0% level for the first time since January 2017. Inflation has now dropped for three successive months, pointing to weakness in the British economy. This was underscored by soft GDP data earlier in the week. GDP for Q4 slowed to 0.2%, and the monthly GDP reading for December has raised alarm bells, with a decline of 0.4%. The British pound is down 1.8% in February, as nervous investors shake their heads at the turmoil surrounding Brexit. Prime Minister May and her European counterparts have all said they don’t want to see Britain crash out of the EU without a deal, but that seems to be the extent of any consensus.

Another factor weighing on the British economy and the pound is the U.S-China trade war. The U.S. has imposed 10% tariffs on Chinese goods and has threatened to raise the tariffs to a punishing 25% on March 1. Trade officials from the U.S. and China are meeting for a third round of negotiations, and U.S. Treasury Secretary Steven Mnuchin has joined the talks. There was positive news on Tuesday, as President Trump said that he could postpone the March 1 deadline if the trade talks made sufficient progress.

Risk appetite very much improved

U.S Dollar under pressure

Risk appetite still riding trade optimism wave

GBP/USD Fundamentals

Wednesday (February 13)

• 4:30 British CPI. Estimate 1.9%. Actual 1.8%
• 4:30 British PPI Input. Estimate 0.2%. Actual -0.1%
• 4:30 British RPI. Estimate 2.6%. Actual 2.5%
• 8:30 US CPI. Estimate 0.1%. Actual 0.0%
  
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
  
• 10:30 US Crude Oil Inventories. Estimate 2.1M. Actual 3.6M
  
• 14:00 US Federal Budget Balance. Estimate -10.5B

Thursday (February 14)

• 8:30 US Core Retail Sales. Estimate 0.0%
• 8:30 US Retail Sales. Estimate 0.1%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Core PPI. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 225K

*All release times are EST

*Key events are in bold

GBP/USD for Wednesday, February 13, 2019

GBP/USD February 13 at 11:15 EST

Open: 1.2894 High: 1.2959 Low: 1.2870 Close: 1.2882

GBP/USD Technical

GBP/USD was mostly flat in the Asian session. The pair posted slight losses in European trade but then recovered. GBP/USD has posted small losses in North American trade

• 1.2851 is providing support
• 1.2910 was tested earlier in resistance. It is a weak line
• Current range: 1.2851 to 1.2910

Further levels in both directions:

• Below: 1.2851, 1.2729 and 1.2615
• Above: 1.2910, 1.3070, 1.3170 and 1.3258

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