UK inflation report hearings preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 23, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    The increased odds of Brexit fears after London Mayor’s move in favor of ‘exit group’ are keeping Sterling bulls at the bay. The GBP/USD pair hit a fresh 7-yr low of 1.4057 on Monday and now trades above 1.41 handle ahead of inflation report hearings in UK.

    Brexit-headlines could overshadow inflation report hearings

    Bank of England, in its quarterly inflation report, revised the inflation forecasts lower earlier this month. Hence, a weaker inflation is already well known and priced-in by the markets.

    As of now, the main issue is Brexit. The uncertainty might wind up dampening demand for the pound for the next few weeks. Moreover, ratings agencies have fired warning shot about a potential downgrade (in outlook) if Britons vote in favor of Brexit.

    Consequently, the inflation report hearing is likely to take a backseat. The pair dipped to a low of 1.4090 in early Europe, before recovering to trade around 1.4112 levels.

    GBP/USD Technical Levels

    The immediate resistance is seen at 1.4156 (daily high), above which the cross could 1.4173 (Jan 26 low). A break higher would expose 1.42 handle. On the other hand, a break below 1.4090 (daily low) would open doors for a re-test of 1.4057 (Monday’s low), which if taken out could see the spot drop to psychological support at 1.40.
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