Asset Watch
Tuesday, July16, 2024
Tomorrow, investors will shift their focus to the UK economic data, inflation and wage levels, to gauge the upcoming Bank of England’s monetary policy. Bloomberg forecasts the YoY UK CPI headline to fall from 2% in May to 1.9% in June, while the YoY core CPI is expected to decline from 3.5% to 3.4%. Additionally, average hourly earnings excluding bonuses are projected to decrease in May from 6.0% to 5.7%.
These data points could help traders anticipate the Bank of England’s future monetary policy. Markets currently expect two rate cuts this year, with the central bank anticipated to cut interest rates by 25 basis points at its August meeting. Any larger-than-expected decline in the UK CPI data and wage rates might prompt traders to price in a third cut this year, which could negatively impact the pound sterling’s value against major currencies.
Notably, the British pound has rallied recently, bolstered by political stability following the Labour Party’s substantial majority in recent elections.
Chart Source: ADSS Platform
Yesterday, the GBP/USD daily candlestick reached a near one-year high at 1.2994 before closing with a bearish pattern, suggesting a potential price reversal. Additionally, the Relative Strength Index (RSI) is currently in overbought territory, and any drop below the 70 level indicates a possible price decline.
Currently, the price is moving within the trading zone between 1.2866 and 1.3072. A daily close below the lower end of this zone could push the price further down towards 1.2616, in this scenario the support level at 1.2775 should be considered. Conversely, a daily close above the upper end of the zone could encourage bulls to rally the price towards 1.3382. In this case, the resistance area between 1.3142 and 1.3172 should be closely monitored.