Forex Crunch GBP/USD Closes Gap and Pushes Higher On Inflation

GBP/USD Closes Gap and Pushes Higher On Inflation
Will European Figures Beat Greek Fears?
Goldman Sachs fad, Critical Week for Pound and Loonie and more on the video outlook
Forex Daily Outlook – April 20 2010

GBP/USD Closes Gap and Pushes Higher On Inflation

Posted: 20 Apr 2010 03:11 AM PDT

British CPI came out higher than expected, with consumer prices rising by an annual rate of 3.4%. This fueled GBP/USD – it closed the weekend gap and broke above a critical line. Will it continue riding north?

British CPI rose from an annual rate of 3% to 3.4%, getting close to this year’s high of 3.6%. Expectations were for a rise to 3.2%. Also the other inflation showed a strong-than expected rise in prices.

RPI – Retail Price Index, printed 4.4%, higher than 4.1% that was predicted. Note that this indicator is always more volatile than others, but some consider it to be more accurate and more relevant to the consumers.

Core CPI also made it to 3% – it was expected to drop from 2.9% to 2.8%. Core CPI excludes the most volatile components in the consumer prices – energy being one of them. This shows that British prices aren’t rising only on the rise in fuel prices, contradicting Mervyn King’s dismissal of inflation.

In the BOE inflation letter to the government, King disregarded the rise in prices and blamed it mostly on the rise in fuel prices. With the elections coming up in two weeks,the bank will not do anything. The issue of inflation will wait for the next meeting of the central bank and the next government.

GBP/USD Minds the Gap

The British Pound had a bad start to the week – it opened significantly lower than Friday’s close – it opened at 1.5293, about 70 pips lower and below the 1.5350 support line. It later fell as low as 1.5191, a safe distance from the 1.5120 support line.

The recovery already began earlier, but the gap was closed only after the inflation figures were released. GBP/USD jumped higher and peaked at 1.5418 at the moment before retreating just under 1.54.

The Pound is now trading between 1.5350 and 1.5520 – this was both last week’s peak and also a support and resistance line when the Pound traded at higher ranges. Above 1.5520, the next significant resistance line is at 1.5833, which worked as a support and resistance line. The last attempt to break this line failed and sent the Pound way down.

On the downside, the next important line under 1.5120 is at 1.4780, the year-to-date low and also a support line in 2009.

There are many more important events ahead (details in the GBP/USD forecast) – employment figures are the main dish tomorrow. The low expectations could turn into a positive surprise and help the Pound. The MPC Meeting Minutes will probably not reveal anything before the elections.

Retail sales and public sector net borrowing are released on Thursday. Also these are very important indicators, but the biggest event is on Friday. preliminary GDP for the first quarter of 2010 – another quarter of growth is expected after Britain got out of recession in Q4 of 2009.

This could turn into a good week for the Pound, after being beaten for quite some time.

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Will European Figures Beat Greek Fears?

Posted: 20 Apr 2010 02:23 AM PDT

The German ZEW economic sentiment rose to 53 points, far better than expected. This helps EUR/USD stabilize after a few bad days. Other figures also shined on the Euro. Will the figures overcome the Greek fears? Update on the factors moving the Euro.

After 6 months of drops, some of them which were a big burden on the Euro, the German ZEW economic sentiment finally went up, and did it a neat way: from the bottom of 44.5 points last month it was expected to rise to 45.2 but scored 53 points, far better than expected. This was not the only positive surprise in Europe:

A big surprise was seen also in the all-European figure – it leaped from 37.9 to 46 points, when 38.9 was expected. The German figure is considered more accurate, but this helped as well.

Also Europe’s current account exceeded expectations: a deficit of 3.9 billion was reported, better than 5.3that was predicted. Last month’s number was revised to the upside.

Earlier, German PPI rose by 0.7%, higher than 0.5% that was predicted. Last month was unchanged. A rise in prices could force Trichet to think of a rate hike. Not in the far future. Note that also in Britain, inflation is on the rise.

EUR/USD stabilizing

All these good figures helped the Euro stabilize around 1.35. This line, 1.35, was the closing line two weeks ago and also last week. This week began with a drop of EUR/USD below this line, with a weekend gap. The pair went as low as 1.3418 and now its settling around 1.35.

On the hand, the Greek crisis is far from over, and it’s still weighing on the currency. Any news coming from the EU, the IMF or from Greece concerning the Greek bonds or the German ability to help will still move the Euro, but the movements will be less strong – the Euro can lean back on some improving factors.

The lines to watch are 1.3380 as a strong support line, followed by 1.3267 – the year to date low. Looking up, the pair will find resistance at 1.36, a swing high and then by 1.37 – a peak that the Euro reached last week on big hopes about Greece. The biggest hurdle on the upside is 1.3850 – after the Euro failed to breach this line, it made a big collapse.

There are many more figures coming Europe, with the Ifo Business Climate on Friday being the most important one. This indicator was better than others, and is expected to rise once again.

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Goldman Sachs fad, Critical Week for Pound and Loonie and more on the video outlook

Posted: 19 Apr 2010 04:12 PM PDT

On the weekly interview with Julie Sinha on Forex TV, I reviewed this week’s events, focusing on the Canadian dollar and the British Pound and seeing Goldman Sachs as a temporary influence on the markets, but the Greek troubles still being very relevant. And there’s more. Enjoy!

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Forex Daily Outlook – April 20 2010

Posted: 19 Apr 2010 02:00 PM PDT

A busy day expects forex traders, Canada BOC Rate Statement and the speech from Ben Bernanke are at the headline. Let’s see what’s on the menu today.

Federal Reserve Chairman Ben Bernanke, head of the central bank in the US, testifies along with Treasury Secretary Tim Geithner, on Lehman Brothers before the House Financial Services Committee, in Washington DC; The testimony can make for some unscripted comments that lead to heavy market volatility which can move the currency.

In the US, Change in the number of barrels of crude oil held in inventory by commercial firms during the past week; this is a US indicator,which also affects the loonie due to Canada’s sizable energy sector; the total number of barrels will probably be similar this time.

In Canada, Bank of Canada (BOC) Interest Rate Statement , can move the currency.

For more on USD/CAD, read the Canadian dollar forecast.

British CPI is expected to rise from 3% to 3.2%. Core CPI is expected to drop from 2.9% to 2.8% and the RPI, retail price index, will probably edge up to 4.1%.

Read more about the Pound in the GBP/USD forecast.

News from Europe: In Germany, Zentrum fur Europaische Wirtschaftsforschung (ZEW) Economic Sentiment; Survey of about 350 German institutional investors and analysts, expected to edge up from 44.5 to 45.2. And the

More In Germany, Producer Price Index (PPI); indicating change in the price of goods sold by manufacturers, is expected to rise by 0.5%.

Later in Germany, Weber, President of Deutsche Bundesbank (Buba), believed to be one of the most influential members of the council, Speaks at the ZEW Center of European Economic Research, in Mannheim; he can move the currency.

More News from Europe Current Account, directly linked to currency demand – expected to rise from -8.1B to -5.3B.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Australia, Monetary Policy Meeting Minutes providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates, can positivaly effects the currency.

For more on the Aussie, read the AUD/USD forecast.

That's it for today. Happy forex trading!

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