PMI data due after central banks unnerve the market
GBP/USD => The pair rises to 1.22
Dow Jones =>The index falls towards 33000
GBP/USD => The pair falls below 1.24
GBP/USD rises from weekly low after dovish BoE vote
GBP/USD is edging higher after falling 2% in the previous session after the BoE underwhelmed. The central bank raised rates by 50 basis points, taking the benchmark lending rate to 3.5%, in line with forecasts. However, two policymakers voted to keep interest rates on hold, making the vote more dovish than expected, particularly next to the more hawkish Federal Reserve. Today attention turns to UK retail sales, which are expected to rise 0.3% MoM in November after rising 0.6% in October. UK business activity data, the composite PMI is expected to fall further in December to 48, down from 48.2, supporting the view that the UK economy is in a recession. Weak data could pull the pound lower.
Where might the GBP/USD price head to?
After hitting resistance at 1.2445, GBP/USD has retreated lower, breaking out below its multi-month rising channel. The pair continues to hold above the 200 sma, which, combined with the RSI still above 50 supports the view that there could be more upside for the pair. Buyers need to rise above 1.2240 to re-enter the rising channel and push above 1.2445 to create a higher high. Sellers could look to take out the 200 sma at 1.2130, to open the door to 1.20, the psychological level.
Dow Jones falls in risk-off
The Dow Jones tumbled 2.25% yesterday and is holding those losses today hawkish central bank guidance from the Fed, combined with weaker-than-expected retail sales, dragged on risk sentiment. Earlier in the week, the Fed hiked rates by 50 basis points, a downshift in hikes from 75 basis points but also raised the terminal rate to 5.1%. The prospect of higher rates for longer pulled the IS equities lower. US retail sales were also weaker than forecast, falling -0.6% MoM in November, down from a 1.3% rise, the biggest decline in almost a year. Looking ahead, US composite PMI data is expected to show that business activity contracted at the same pace of 46.4. The level 50 separates expansion from contraction.
EU Stoxx steadies after ECB-inspired selloff
EUstoxx50 fell 3.5% in the previous session after the ECB hiked interest rates by 50 basis points, in line with forecasts, taking the deposit rate to 2%. ECB President Christine Lagarde also warned that more rate hikes were coming to tame double-digit inflation. Lagarde said that the central bank intends to raise interest rates at 50 basis points for some time, in a more hawkish than expected stance. The central bank also unveiled plans for reducing its balance sheet, although detail will follow next year. Today attention is back on the economic calendar with the release of PMI data, which is expected to show that business activity contracted at a slightly slower pace of 48 in December, up from 47.8. The level 50 separates expansion from contraction. Eurozone inflation is also due to be released and is set to ease to 10%.
Support for the pair could be seen at 3810 (August high) and 3750 (50 sma).
Resistance could be seen at 3970 (yesterday’s high) and 4035 (December high).
