GBP Hangs in the Balance as Consumer Prices Rise
If you’ve been watching the economic reports coming out of the UK for the past year, or even the past couple months and you may have noticed that the GBP has been as fundamentally range-bound as it has been technically. This is significant because while the Euro has garnered most of the international attention, at least as it relates to the US Dollar and the USD Index, the GBP has been making very quiet upticks in its economic recovery. Generally a two steps forward, one step back kind of maneuvering it broke its previous pattern and showed big moves today in some significant reports.
The Consumer Price Index (CPI) and the Retail Price Index (RPI) both made significant gains today. CPI (YoY) data rose almost a full point (1.9% to 2.8%) while the RPI (YoY) data jumped significantly from .3% to 2.4%.
On the surface this may raise alarms for inflation and possible rate changes on the horizon, but what sets the United Kingdom apart right now is a stabilizing unemployment rate and average earnings. Wednesday’s job-related news reports (1/20/2010) will be the determining factor in deciding whether or not UK’s hawks or doves will have the floor. If jobs and earnings stabilize and/or show improvement as predicted we may hear a more dovish tone to the conversation that may imply there is no immediate cause for concern as consumers’ incomes may start catching up, which would give us a great buying opportunity. If predictions are negated, however, there will be a greater call for action of the BoE, which would at least return the GBP to its intra-day range, if not trigger a pullback to Daily support.
Either way, it is no surprise that the GBP has found its boundaries and stayed within them. It’s been range bound since Spring of 2009 and without a definitive change in its economic response to the data, it could stay there for quite a while longer.
Triffany Hammond helps traders of all levels, gain the tools, resources and guidance necessary to build on their strengths and work around their weaknesses so that they can make the best possible decisions for themselves in the Forex Market. Triffany is a regular speaker and contributor at 
Very Interesting…. on this rare occasion I “flew the coop” and am flat out with no positions. Took fair profits today, but for me, this is a chance to force myself to take a tough look at the positions I want. Too often, I find myself with positions on, in which I have no strong conviction about – just hoping they go my way, and often they don’t. I relax, take my eye off the ball (as in USDJPY, losing my tail). lost gains, better than lossesssss. So, Triff, thanks for a good analysis and perspective.
Having cleared my positions, I am looking at the EURUSD….. on the one hour, its hit a nice bottom and looks as though it might perform….. still looking, with a small long
Anyone else?
Triffany, I’m with you on this one … though i do think that the UK uptrend is a correction from bad mouthing the UK for so long, last years GDP reports were in the tank and so were consumer chilli con carne, all this basically amounts to everyone saying the UK is in a very bad way, so eventually there will be reports that are better than the last set, so for me this is a correctional move. As for the EUR, well, the ECB likes to do, what i call “The Chernobyl jungle” as in “really ? there is absolutely nothing wrong with the europe we don’t have a crisis, i think someone just burned the chips” attitude … things might just be correcting itself between these two … and yes i want to declare war on france !!!!
EURUSD continued: One hour, its hit 1.42501 6 times (counting close kisses) since December. Basically, its trending down – lower highs. Selling sentiment is decreasing. The 4 hour could be marking a tweezer bottom, not sure yet. It might be ready to break south, but with so many hits on the 1.425, seems uncertain. Perhaps from a fundamental macroeconomic view, the EUR is weaker than the USD, giving credence to the EURO cross-currents. Looking at the daily, it just hit the 800 with not a lot of spread between it and the 144, 62 and 200 MAs.
Will someone please correct or perfect my thinking and tell me where it is headed? Aby? Triff, Yaqui,,, anyone? Come on….. venture a guess — still a little long and a couple PIPs negative.
Aby gets the award for linguistic expression! colorful. Yea, Yea…. love it.
Well Jerry, did i ever tell you how much i hate the EURUSD ? either way this pair for me is untradable until it breaks its messing about and does something like break and close above the 800SMA on the 4HR or below 1.4220 support, personally i think, with the amount of bad news coming out of europe, its held up quiet well. I read recently about Turkey, apparently the entire country is going bust and Triche had to make a quick “we’re not going to bale them out if this one” statement, just to save the EUR from crashing. In short either direction is possible at the moment. but i think 1 more bit of bad news in europe and 1 more nice flavored ice cream from the UK and the US and we could see people getting fed up of europe for a bit.
Agreed, Aby, news wise…… But I think much of the EUR news is discounted, in which case, I think a small long – just based on the charts, withstanding the previous hammers at the 1.425, price will “push up”. Thanks for your view.. We’ll see how the wind blows and how Sir Triche handles the turkeys… cheers. Points well taken.
Aby, you were absolutely correct! better reader than I! cheers, my friend and thanks for the heads up on USDCAD.
EUR has been off my radar recently… it’s at extremes now and I have a bias to the long side, no positions on.
Aby I also enjoyed your USDCAD analysis, wasn’t watching it at the time.