- US stocks turn positive after the opening bell, dollar weakens.
- A quiet session so far in the financial markets.
- GBP/USD fails to break 1.2030/40 and pulls back to 1.1955.
The pair GBP/USD hovers around 1.2000, around the same level where it closed on Tuesday. The pound bottomed in European time at 1.1954 and then bounced back to the 1.2000 zone.
For the third day in a row, GBP/USD failed to break above the 1.2030/40 zone and weakened. The current tone favors a correction that could face the supports at 1.1950 and 1.1920.
In the short term, if the cable rises above 1.2010 it would gain support. While below 1.2040, gains look limited. A consolidation above should clear the way towards 1.2100.
UK inflation and US house prices continue to rise
On Wednesday, UK inflation data showed the annual rate of the CPI rose to 9.4%, above the 9.3% market consensus, reaching the highest level in 40 years. The figures did not provoke a reaction in the pound. The Bank of England’s 50 basis point hike at the August meeting is fully priced in. “Looking ahead, the swap market sees a tightening of 175 basis points in the next six months, which would see the policy rate peaking at 3%, followed by a stable rate in the next six months and the start of a easing cycle in the following twelve months,” BBH analysts explained.
As for the Tories guy, Penny Mordaunt has been eliminated from the Conservative leadership contest in the last round, leaving Rishi Sunak and Liz Truss in the second round. Prime Minister Boris Johnson faced his latest PMQ in Parliament as it goes into summer recess. The next prime minister will be announced in early September.
In the US, existing home sales fell in June to 5.12 million (market consensus: 5.38 million), the fifth consecutive decline amid rising interest rates. The report showed that the median existing home price hit a new record in June at $416,000.
The US dollar is getting mixed results. DXY is up 0.15%, amid rising US yields. However, the greenback maintains recent losses. Market participants await next week’s FOMC meeting.
Technical levels
Source: Fx Street
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