Sterling rebounds today as UK prime minister Theresa May pledged to adopt a "phased approach" to achieve a "smooth and orderly Brexit". More important, the positive reaction was towards the confirmation that "the government will put the final deal that’s agreed between the U.K. and the EU to a vote in both Houses of Parliament before it comes into force." May emphasized that UK will not stay as a member of the single market. But She would opt to "have a customs agreement with EU" and reach the country’s "own tariff schedules at the WTO". GBP/USD’s break of 1.2316 minor support argues that the pair has successfully defended 1.1946 key near term support and opens up the case for further rebound to 1.2774 resistance.
Also from UK, CPI accelerated to 1.6% yoy in December, up from 1.2% yoy and beat expectation of 1.4% yoy. That’s also the highest reading since July 2014. Core CPI rose to 1.6% yoy, above expectation of 1.4% Yoy. Office for National Statistics head of inflation Mike Prestwood noted that "rising airfares and food prices, along with petrol prices falling less than last December, all helped to push up the rate of inflation. Rising raw material costs also continued to push up the prices of goods leaving factories." Also from UK, PPI input rose to 15.8% yoy, PPI output rose to 2.7% yoy, PPI output core dropped to 2.1% yoy.
From Eurozone, Germany, ZEW economic sentiment rose to 16.6 in January, up from 13.8, but missed expectation of 18.4. Current situation gauge rose to 77.3, up from 63.5, above expectation of 65.0. Eurozone ZEW economic sentiment rose to 23.2, up from 18.1 but missed expectation of 24.2. ZEW president Achim Wambach noted that "the slight increase" in sentiment "is mainly due to the improved economic situation across European countries." And, "this improvement in expectations can thus also be seen as a leap of faith for 2017."
Dollar weakens broadly in reaction to US president-elect Donald Trump’s comments on the currency’s strength. He complained that the Dollar’s strength against China’s Yuan "is killing us". One of his adviser, Anthony Scaramucci of Skybridge Capital, also said in a panel at the World Economic Forum that "we need to be careful about the rising currency." Released from US, Empire state manufacturing index dropped to 6.5 in January, below expectation of 8.5.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1990; (P) 1.2037; (R1) 1.2089; More…
GBP/USD’s strong rebound and break of 1.2316 minor resistance suggests short term bottoming at 1.1986, ahead of 1.1946 key support level. And, fall from 1.2774 is likely completed too. Intraday bias is back on the upside for 1.2432 resistance first. Break will target 1.2774 again. Price actions from 1.1946 are viewed as a consolidation pattern. Thus, we’d expect strong resistance at 1.2774 to limit upside and bring down trend resumption eventually.
In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.
Economic Indicators Update
|00:30||AUD||Home Loans Nov||0.90%||0.00%||-0.80%||-0.60%|
|04:30||JPY||Industrial Production M/M Nov F||1.50%||1.50%||1.50%|
|09:30||GBP||CPI M/M Dec||0.50%||0.30%||0.20%|
|09:30||GBP||CPI Y/Y Dec||1.60%||1.40%||1.20%|
|09:30||GBP||RPI M/M Dec||0.60%||0.40%||0.30%|
|09:30||GBP||RPI Y/Y Dec||2.50%||2.30%||2.20%|
|09:30||GBP||PPI Input M/M Dec||1.80%||2.40%||-1.10%||-0.60%|
|09:30||GBP||PPI Input Y/Y Dec||15.80%||15.50%||12.90%||13.30%|
|09:30||GBP||PPI Output M/M Dec||0.10%||0.40%||0.00%||0.10%|
|09:30||GBP||PPI Output Y/Y Dec||2.70%||2.90%||2.30%||2.40%|
|09:30||GBP||PPI Output Core M/M Dec||0.00%||0.20%||0.00%||0.10%|
|09:30||GBP||PPI Output Core Y/Y Dec||2.10%||2.20%||2.20%||2.30%|
|09:30||GBP||House Price Index Y/Y Nov||6.70%||6.10%||6.90%|
|10:00||EUR||German ZEW (Economic Sentiment) Jan||16.6||18.4||13.8|
|10:00||EUR||Eurozone ZEW Survey (Economic Sentiment) Jan||23.2||24.2||18.1|
|10:00||EUR||German ZEW (Current Situation) Jan||77.3||65||63.5|
|13:30||USD||Empire State Manufacturing Jan||6.5||8.5||9|