GBP/USD is showing significant swings on Tuesday, moving as much as 1 percent. In North American trade, the pair is trading at 1.3114, down 0.29% on the day. In economic news, sharp British indicators were unable to boost the pound, as they have been overshadowed by the upcoming Brexit vote in parliament. British GDP gained 0.5% in January, above the estimate of 0.2%. Manufacturing production jumped 0.8%, beating the forecast of 0.2%. In the U.S., Core CPI edged down to 0.1%, shy of the estimate of 0.2%. CPI remained steady at 0.2%. On Wednesday, the U.K. government releases its annual budget, while the U.S. publishes PPI and durable goods orders data.
It is crunch time for the long and windy Brexit saga, with parliament set to vote on the government’s withdrawal agreement later on Tuesday. Will this vote be any different than the first attempt in January, which the government lost by some 290 votes? Prime Minister May said she had secured “legally binding” changes from the E.U., which would allow the U.K. to cancel the backstop arrangement over Ireland, but it’s questionable if this will be enough to sway Conservative MPs, many who fear that the backstop will prevent the U.K. from getting out of the European Union. If the vote on withdrawal is rejected by lawmakers, the next step is another set of votes on Wednesday – one on a no-deal Brexit, and the second on requesting the EU to extend Article 50 and delay Brexit beyond March 29. Traders should be prepared for strong movement from GBP/USD in the North American session.
U.S. inflation numbers remain well below the Federal Reserve’s inflation target of 2.0 percent. This has given the Fed plenty of breathing room regarding rate hikes, as policymakers continue to signal that the Fed could hold off until the second half of the year. In a television interview on Sunday, Jerome Powell left no doubt about where the Fed stands, saying that the Fed would remain patient and did not felt any hurry to change interest rate policy. The dovish stance of the Fed could weigh on the dollar, as a lack of rate hikes makes the greenback less attractive to investors.
Trade trembles and Brexit bumbling start the week
Brexit and sterling volatility expected
Tuesday (March 12)
- 5:30 British GDP. Estimate 0.2%. Actual 0.5%
- 5:30 British Manufacturing Production. Estimate 0.2%. Actual 0.8%
- 8:30 US CPI. Estimate 0.2%. Actual 0.2%.
- 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
- 8:45 US FOMC Member Brainard Speaks
- 13:01 US 10-year Bond Auction
Wednesday (March 13)
- 8:30 British Annual Budget Release
- 8:30 US Core Durable Goods Orders. Estimate 0.1%
- 8:30 US Durable Goods Orders. Estimate -0.5%
- 8:30 US PPI. Estimate 0.2%
- 8:30 US Core PPI. Estimate 0.2%
*All release times are EST
*Key events are in bold
GBP/USD for Tuesday, March 12, 2019
GBP/USD March 12 at 11:55 DST
Open: 1.3151 High: 1.3290 Low: 1.3005 Close: 1.3114
GBP/USD posted considerable gains in the Asian session but reversed directions and fell sharply in European trade. The pair has rebounded in North American trade, recording considerable gains.
- 1.3070 was tested earlier in support
- 1.3170 is the next resistance line
- Current range: 1.3070 to 1.3170
Further levels in both directions:
- Below: 1.3070, 1.2910 and 1.2831
- Above: 1.3170, 1.3258, 1.3362 and 1.3460
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