UK100: Thoughts and Analysis Today's focus: UK100
Pattern – LH decline
Support – 7375 - 7250
Resistance – 7466 - 7710
Hi, and thanks for checking out today's update. Today, we are looking at the UK100 on the daily chart.
Today's video asks if the UK100 will continue to move lower after setting up a few beach technical signs. What do you think about the reasons presented in today's video update? Are the lower highs after the trend break and failed rally yesterday a new momentum shift to sellers in the short term?
We continue to look at major index influences and watch today's UK GDP. If buyers are able to reverse today's selling and break the 7466 resistance, this will cancel out this sell idea.
Good trading.
Ukgdp
GBP/USD rockets as US inflation dipsThe British pound has soared today, following the US inflation report. GBP/USD is trading at 1.1661, up a massive 2.7%.
The October inflation report was lower than what everyone had expected, which has triggered strong volatility in the currency markets. The US dollar is sharply lower against the majors, as the markets are expecting the Fed to ease up on interest rates after today's favourable inflation data.
Headline CPI dropped to 7.7%, down from 8.2% in September and below the consensus of 8.0%. Core inflation slowed to 6.3%, down from 6.6% and lower than the forecast of 6.5%. The surprisingly low numbers have turned rate pricing on its head. Prior to the inflation release, the markets had priced in 55% for a 50 bp increase and 45% for a 75 bp hike. This has changed to 80-20 in favor of a 50 bp hike, which has sent the US dollar into a broad retreat.
The Fed may end up delivering a 50 bp move in December, but investors should remind themselves that this doesn't mean the Fed is going soft. It wasn't too long ago that a 0.50% hike was considered 'supersize'; it's only in comparison to 0.75% or full-point moves that a 0.50% increase can be considered dovish. Secondly, Fed Chair Powell said at last month's meeting that the terminal rate would be higher than previously expected, a clear sign that the Fed remains hawkish.
The UK releases key data on Friday, and the markets are braced for soft readings. GDP for the third quarter is expected to slow to -0.5% QoQ, down from 0.2% in the second quarter. Manufacturing Production for September is expected at -0.4%, which would mark the third decline in four months. If these releases are weaker than expected, the pound could give back some of today's huge gains.
There is resistance at 1.1767 and 1.1844
1.1609 and 1.1505 and providing support
Red-hot pound punches past 1.41, GDP nextThe pound is in positive territory on Tuesday. In the European session, GBP/USD is trading at 1.4144, up 0.20%.
The Scottish National Party (SNP) handily won the Scottish election, but investors sighed with relief as the pro-independence party came up just short of a majority. This means that plans for another referendum on Scottish independence may be delayed, which should ensure political stability for the time being. The pound responded with huge gains of close to 1.0% on Monday.
The British government has given the green light for a further easing of health restrictions, as of May 17. The positive news on the Covid front has also been bullish for the streaking pound.
Attention has shifted to UK GDP for the first quarter, which will be released on Wednesday (6:00 GMT). The market is bracing for a contraction in GDP. This would reflect the lockdown that was in effect for much of the first quarter and had a chilling effect on economic activity. The consensus stands at -1.6% (MoM) and -6.1% (YoY).
Inflation concerns have been dominating the financial markets, sending equities lower and boosting the safe-haven US dollar. The US and China, the world's two biggest economies and both showing signs of rising inflationary pressures, which is causing jitters for investors.
In China, PPI climbed 6.8% (YoY), above the 6.5% forecast and up sharply from 4.4% in March. The US releases April inflation numbers on Wednesday. The consensus stands at 2.3% for Core CPI (YoY), compared to 1.6% in March. If Core CPI matches or exceeds the estimate, investors may be of the opinion that the Fed may have to tighten policy sooner rather than later, which would be bullish for the US dollar.
GBP/USD is testing resistance at 1.4137, followed by resistance at 1.4269. There are support lines at 1.3859 and 1.3727
