Following the ECB interest rate cut and restart of QE last week, the Fed’s interest rate cut yesterday, this morning’s Bank of Japan and SNB decision to keep interest rates unchanged, the Bank of England’s interest rate announcement is expected to show no change. With wage pressures accelerating, the British central bank is likely to remain on the sidelines which will support a stronger British Pound moving forward. Can the rally in the GBPUSD extend as monetary policies between the US and the UK diverge or is price action going to partially reverse its advance? Subscribe to the PaxForex Daily Fundamental Analysis now and let our expert analysts guide you through the forex market yielding over 5,000 pips per month in profits!
Forex traders will get a series of US economic reports today after the US central bank cut interest rates by 25 basis points, as expected, to a range between 1.75% and 2.00%. A regional business reports is expected to show a slowdown while exiting home sales are called lower with a contraction in leading indicators. Will this set of data deliver as expected and what does this mean for the GBPUSD? Today’s fundamental analysis will take a look at the downside potential in this currency pair and also explore the upside risk.
Here are the key factors to keep in mind today for British Pound trades:
- UK Retail Sales: UK Retail Sales for August are predicted to decrease by 0.3% monthly and to increase by 2.3% annualized. Forex traders can compare this to UK Retail Sales for July which increased by 0.2% monthly and by 2.9% annualized. UK Retail Sales Including Auto and Fuel for August are predicted flat at 0.0% monthly and to increase by 2.8% annualized. Forex traders can compare this to UK Retail Sales Including Auto and Fuel for July which increased by 0.2% monthly and by 3.3% annualized.
- Bank of England Interest Rate Decision, Asset Purchase Target and Corporate Bond Target: The Bank of England is predicted to keep interest rates at 0.75%, the Asset Purchase Target £435B and the Corporate Bond Target at £10B. Forex traders can compare this to the previous Bank of England meeting where the UK central bank decided to keep interest rates at 0.75%, the Asset Purchase Target £435B and the Corporate Bond Target at £10B.
Here are the key factors to keep in mind today for US Dollar trades:
- US Initial Jobless Claims and Continuing Claims: US Initial Jobless Claims for the week of September 14th are predicted at 214K and US Continuing Claims for the week of September 7th are predicted at 1,672K. Forex traders can compare this to US Initial Jobless Claims for the week of September 7th which were reported at 204K and to US Continuing Claims for the week of August 31st which were reported at 1,670K.
- US Philadelphia Fed Business Outlook: The Philadelphia Fed Business Outlook for September is predicted at 10.5. Forex traders can compare this to the Philadelphia Fed Business Outlook for August which was reported at 16.8.
- US Current Account Balance: The US Current Account Balance for the second-quarter is predicted at -$127.4B. Forex traders can compare this to the US Current Account Balance for the first-quarter which was reported at -$130.4B.
- US Existing Home Sales: US Existing Home Sales for August are predicted to decrease by 0.7% monthly to 5.38M. Forex traders can compare this to US Existing Home Sales for July which increased by 2.5% monthly to 5.42M.
- US Leading Index: The US Leading Index for August are predicted to decrease by 0.1% monthly. Forex traders can compare this to the US Leading Index for July which increased by 0.5% monthly.
Should price action for the GBPUSD remain inside the or breakdown below the 1.2440 to 1.2525 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1.2470
- Take Profit Zone: 1.2210 – 1.2310
- Stop Loss Level: 1.2555
Should price action for the GBPUSD breakout above 1.2525 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1.2575
- Take Profit Zone: 1.2705 – 1.2780
- Stop Loss Level: 1.2525
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