- UK growth is positive in July but disappointed expectations.
- The focus is on US inflation figures.
- GBP/USD rises for the second day in a row and tests the 20-day SMA.
The GBP/USD is rising on Monday and during the American session it rose to 1.1709, reaching the highest level since August 30. Cable remains near highs, holding daily gains and a very short-term bullish bias.
The pound continues to recover from multi-year lows against the dollar. It is testing the 20-day SMA and a consolidation above could open the door to a more sustainable rally.
The weakness of the dollar awaiting the CPI
The US dollar is falling broadly on Monday, affected by improving risk sentiment and stability in US yields. DXY is down 0.75% to trade around 108.15. The 10-year yield in the US stands at 3.28% and the 2-year yield at 3.52%. The Dow Jones is up 0.90% and the S&P is up 1%, adding to last week’s gains.
On Tuesday the CPI figures for August in the United States will be released. A decrease of 0.1% in the monthly reading and a drop in the annual rate of 8.5% to 8.1% are expected. The report will be relevant to Fed rate hike expectations ahead of next week’s FOMC meeting. The Bank of England will also have its meeting next week (postponed due to the Queen’s death).
In the UK, July growth data showed a recovery after June’s 0.6% contraction, with an expansion of 0.2%. The figure was below expectations. Labor data will be released on Tuesday and the CPI on Wednesday.
Technical levels
Source: Fx Street
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