The buck remains pressured heading into the final trading day of the week. Jerome Powell’s 2nd day of testimony was little different from the 1st. A 0.25% interest rate cut is the likely outcome of July’s Fed meeting. The question for the US dollar is now whether there will be further cuts down the line.
The cable rate (GBPUSD) reached weekly highs yesterday as anti-dollar flows pushed many of the majors to their best levels in a number of trading days. While the buck has been struggling there’s good reason to believe this recent pain may not be endured. Following last week’s solid jobs report, this week has provided one of the highest US CPI (consumer price index) readings of recent times. This would immediately catch the Fed’s attention and indicate that interest rates may not need to be pushed too much lower in order to stoke the necessary levels of inflation.
For the pound the next major hurdle lies at the pocket of resistance which has formed between $1.2560 – $1.2575. If the rate can surpass these levels then the door is once again open to the $1.26 handle and beyond. On the downside, short-term support hangs in around the January flash-crash low at $1.2430. This level was tested on Tuesday and held up well.
Today’s calendar is a light one. Eurozone inflation numbers will highlight the morning session while US PPI numbers (producer price index) will feature in the afternoon.
Have a great weekend.
Written by Viv Savani. 8:29am, July 12th 2019
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