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GBP/USD – Pound Yawns as Inflation Slips to 1.3%

By:
Kenny Fisher
Updated: Jan 16, 2020, 08:19 UTC

The pound has remained steady this week, despite some dismal economic data. GDP declined by 0.3% in November and inflation slowed to 1.3% in December. If the soft economic numbers keep coming, the pound could find itself in 1.29 territory in a hurry.

GBP/USD Price Forecast - British Pound Pulls Back

GBP/USD is trading sideways in the Thursday session. Currently, the pair is trading at 1.3039, up 0.02% on the day.

Inflation Falls to 3-Year Low

The British economy declined 0.3% in November, and there was more bad news on Wednesday, as consumer inflation slowed to just 1.3% in December. This marked the lowest level since November 2016.  Inflation was running at a healthy clip of 2.0% in mid-2019, but dropped sharply in the second half the year, as the British economy has been struggling. If inflation continues to sag, the Bank of England will have to consider lowering rates, which would push the pound downwards.

Technical Analysis

With the pound remaining steady, our technical analysis is unchanged. The key line of 1.30 continues to provide support. The 50-EMA is also situated at this level. This is followed by support at 1.2950, which faced strong pressure earlier in the week.

On the upside, 1.3050 was tested on Wednesday and remains vulnerable. This is followed by resistance at the round number of 1.3100.

Pacific Currencies – Daily Summary

USD/CNY

After starting the week with losses, USD/CNY is showing limited movement. Currently, the pair is trading at 6.89, up 0.01% on the day. In economic news, Chinese New Loans fell sharply to 1140 billion yuan in December down from 1390 billion a month earlier. This figure was well below the estimate of 1250 billion yuan. China will release GDP for the fourth quarter on Friday, with growth expected to remain unchanged at 6.0%.

AUD/USD

It remains a quiet week for AUD/USD. The pair is currently trading at 0.6905, up 0.06% on the day. There are no Australian events on the schedule. We could see stronger movement from the pair on Friday, as China releases fourth-quarter GDP.

NZD/USD

NZD/USD is slightly higher in Thursday trade. Currently, the pair is trading at 0.6635, up 0.28% on the day. Later in the day, New Zealand releases the Business NZ Manufacturing Index. The indicator has shown slight expansion in the previous two releases, with readings just above the 50-level.

About the Author

Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.

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