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GBPUSD: ⬇️ Sell

•  GBPUSD reversed from resistance area
•  Likely to fall to support level 1.2800

GBPUSD recently reversed down from the resistance area between the resistance level 1.3035 (which has been reversing the price from October), resistance trendline of the daily up channel from January and the upper daily Bollinger Band.

The downward reversal from this resistance area created the daily Japanese candlesticks reversal pattern Evening Star which started the active wave 3.

GBPUSD can be expected to fall to the next support level 1.2800, the former monthly high from December.

WTI crude oil: ⬆️ Buy

• WTI crude oil broke resistance area
• Likely to rise to resistance level 71.00

WTI crude oil recently broke the resistance area between the resistance level 68.60 (top of the previous wave 1), resistance trendline of the daily down channel from February and the 50% Fibonacci correction of the downward impulse from last month.

The breakout of this resistance area accelerated the active impulse wave 3 of the higher impulse wave (3).

WTI crude oil can be expected to rise to the next resistance level 71.00, target price for the completion of the active impulse wave 3.

Markets

UK markets today at least got some distraction from the ongoing noise on the upcoming US tariffs with the UK February price data and the spring budget announced by UK Chancellor Reeves, including updated economic and fiscal forecasts from the Office of Budget Responsibility (OBR). February CPI at least gave some comfort. Headline CPI slowed more than expected at 0.4% M/M and 2.8% Y/Y (from 3.0%) as did core inflation (3.5% from 3.7%). At the same time, services inflation stayed elevated at 5.0%. This outcome rekindled some hope for the BOE to consider a additional rate cut at the May 8 meeting. The market raised chances for this to happen to 75% even as last week’s BOE minutes showed that only one MPC member already supported an additional step at that time. In its economic revision related to the spring fiscal update of the government, the OBR halved expected growth for this year to 1.0% before recovering to an average of 1.75% for the rest of the decade (1.9% next year). Inflation is expected to peak at 3.8% mid 2025, due to higher food and energy prices and persistently high wage growth, but should ‘rapidly’ return to the BoE target thereafter. The fiscal outlook also deteriorated, but OBR says that government policies, notably the direct savings from welfare reforms and the reduction in day-to-day departmental spending and the indirect boost to receipts from planning reforms, raise £14 billion in 2029-30, offsetting the underlying deterioration. The ‘combined’ market reaction to both the CPI data and Reeves’ spring budget can be considered as fairly constructive. The UK yield curve initially steepened after the CPI and before the budget (2-y -5.0 bps and 30-y -1.2 bps) but the curve flattened somewhat after its release. UK yields currently ease between 4.0 bps (2-y), 2.5 bps (10-y) and 5.0 bps (30-y). At least for now, the market doesn’t further question fiscal sustainability again. Still LT UK yield are holding near cycle top levels. The debate on BoE easing remains open. The OBR assessment of inflation returning to 2.0% next year at least doesn’t complicate the BoE framework. On FX markets, sterling declined after the CPI (both against USD and euro). USD strength currently prevails with cable trading near 1.289. EUR/GBP tested the 0.8375 area in morning trading. The reaction to the budget was limited. EUR/GBP pair trades near 0.836, mainly on a soft euro.

On other core markets, US and EMU interest rates again show a divergent pattern. The US yield curve steepens with yields trading from unchanged (2-y) tot +3.75 bps. US durable goods orders were solid (0.9% orders and shipments non-defense ex aircraft). EMU yields still are tentatively oriented south (German 2-y -2.3 bps, 30-y +0.5 bp). EUR/USD reversed an intraday dip near 1.077, but holds below the 1.08 mark. Equities mostly are trading in red (S&P 500 -0.35%, EuroStoxx 50 -0.78%).

News & Views

Sweden is raising its defense spending plans to 3.5% of GDP by 2030, the Swedish prime minister Kristersson announced today. Spending has so far projected to reach 2.4% by end this year and 2.6% in 2028 but the government has acknowledged that more needs to be done given uncertainty surrounding the US’ commitment to NATO. Sweden is anticipating on beliefs that NATO will soon set a goal for member states to ramp up spending between 3% and 4%. The country’s low public debt leaves it in a better position to raise military spending than many other European peers while also having sizeable (relative to GDP) industrial capacity to help bring about a full-fledged European defense apparatus. That, combined with the Riksbank having ended the easing cycle has jolted the SEK over recent weeks. EUR/SEK yesterday hit a new 2.5 year low (SEK high) around 10.83 and is holding on to those gains today.

The Czech National Bank as expected left the policy rate unchanged at 3.75%. The board recently clearly hinted at such an outcome, forged amongst others by better than expected Q4 growth figures, still above-target inflation and surprisingly strong wage data. The CNB governor will deliver a press conference later today and his assessment of recent domestic macro figures is one of the key elements to watch for, along with a review of the implications of the external environment and geopolitical risks & his assessment of the new level of the neutral (terminal) interest rate. KBC Economics expects one final rate cut in May to 3.5% with an outside chance for another fine-tuning cut should inflation recede faster and/or economic growth slow more than expected. The Czech crown enters the presser slightly weaker with EUR/CZK near 24.92. That’s still among the strongest CZK levels in nine months, though.

The British pound is lower on Wednesday following the UK inflation report. In the European session, GBP/USD is trading at 1.2897, down 0.36%.

UK inflation surprises on the downside at 2.8%

UK inflation for February rose 2.8% y/y, below the market estimate of 2.9%. This was lower than the 3% gain in January. The main contribution to the drop in inflation was lower prices for clothing and housing. On a monthly basis, CPI rose 0.4%, up from 0.1% in January but lower than the market estimate of 0.5%. Core CPI also eased, falling from 3.7% to 3.5%.

The drop in inflation is good news but the Bank of England remains concerned about the upside risk of inflation. Services inflation, which has been sticky, was unchanged at 5%.

The BoE will consider a rate cut at the next meeting in May, but will be monitoring the effects of increased employer taxes starting in April as well as today's Spring Statement.

At last week's meeting, the BoE expressed concern over worsening "global trade policy uncertainty" and pointedly mentioned US tariffs. The Trump administration's new trade policy has raised trade tensions and a global trade war would hurt growth and boost inflation.

Finance Minister Reeves announces deep spending cuts

The slight drop in inflation is also good news for Finance Minister Rachel Reeves, who delivered the budget update today. The update did not contain any further tax increases and announced deep spending cuts. Borrowing a phrase from the Bank of England at last week's meeting, Reeves said "increased global uncertainty" had increased borrowing costs and led to economic instability.

GBP/USD Technical

• GBP/USD has pushed below support at 1.2940. The next support level is 1.2864
• There is resistance at 1.2940 and 1.2991

UK consumer inflation was weaker than expected. The annual rate of price increases slowed to 2.8% from 3.0%. It remains well above the local low of 1.7% recorded in September. The latest deceleration is still more of a hope than a signal that inflation is slowing, as the previous reading was the highest since March 2024.

However, the downside surprise may allow the Bank of England to return to cutting interest rates sooner and maintain the pace of quarterly cuts.

The GBPUSD reacted to the weaker-than-expected data by falling around 0.5% to 1.2885 before stabilising around 1.2900. Technically, the Pound is at risk of a correction (at least) after a 7.5% rally from the January lows. In the middle of last week, the GBPUSD stalled near 1.3000, clearly reluctant to cross the psychologically important line without fundamental support and amid accumulated local overheating.
Pound is at risk of a correction after a 7.5% rally from the January lows, helped by the data

Possible correction targets are 1.2800 and 1.2650. The 200-day moving average and 76.4% retracement level lie around the former. The 50-day average and 61.8% level cross the latter.

WTI oil price continues to trend higher for the sixth consecutive day and hit the highest in three weeks on Wednesday.

Stronger than expected drop in US crude stocks last week (API report) contributed to the latest acceleration higher, as oil remains supported by growing concerns about potential supply shortage, following a threat from the US of imposing sanctions to those buying oil from Venezuela, with China being top buyer of Venezuelan oil.

The recent new round of US sanctions on Iran’s oil sales, further complicated the situation, as China is also the biggest buyer of crude oil from Iran.

Decision of OPEC+ to further rise output from May and positive signals from peace talks between Russia, US and Ukraine, would partially offset bullish signals and likely limit current rally.

Bulls pressure psychological $70 resistance and eye also significant barriers at $70.70 zone (Fibo 38.2% of $79.35/$65.22 downtrend / 100DMA), where stronger headwinds could be expected, as daily studies are overbought, and indicators are currently providing mixed signals.

Fundamentals are expected to remain the strongest driver of oil prices, with focus on US tariffs and sanctions, which are likely to play a key role.

Violation of $70.00/70 zone to generate stronger bullish signal and open way for further rise of oil prices, while failure here would be an initial negative signal, which would need verification on drop below $68.55/00 zone (broken Fibo level / converged 10/20DMA’s.

Res: 70.00; 70.70; 71.00; 71.34.
Sup: 69.05; 68.55; 68.00; 67.79.

Daily Pivots: (S1) 1.0769; (P) 1.0800; (R1) 1.0822; More...

Intraday bias in EUR/USD Is back on the downside, with breach of 1.0775 temporary low. Corrective fall from 1.0953 is extending lower, but downside should be contained by 38.2% retracement of 1.0358 to 1.0953 at 1.0726 to bring rebound. On the upside, break of 1.0953 will resume the rally from 1.0176 towards 1.1274 key resistance.

In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

Daily Pivots: (S1) 0.8801; (P) 0.8825; (R1) 0.8850; More…

USD/CHF is staying in consolidation from 0.8757 and intraday bias stays neutral. In case of stronger recovery, upside should be limited by 0.8911 support turned resistance. On the downside, break of 0.8757 will resume the fall from 0.9200 to 61.8% retracement of 0.8374 to 0.9200 at 0.8690. Sustained break there will pave the way back to 0.8374 support.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

Daily Pivots: (S1) 149.33; (P) 150.14; (R1) 150.72; More...

No change in USD/JPY's outlook and intraday bias stays neutral. Strong resistance is still expected from 150.92 to complete the corrective recovery from 146.52. On the downside break of 148.17 support will bring retest of 146.52 first. Sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will resume the fall from 158.86 to 139.57 support. However, firm break of 150.92 will argue that fall from 158.86 has completed and turn bias back to the upside for 154.79 resistance next.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.