Trumpmania is taking a break from dominating the global media headlines as UK Prime Minister Theresa May is the talk of the town after she finally invoked Article 50, effectively providing a letter to the European Union telling Europe that the United Kingdom wants a divorce.
I am on the lookout for short-to-medium term bullish price patterns to form on the GBP/USD and other GBP pairs in the coming days. Currently, the cable is stuck within its wide 1.20-1.27 range. But is in the upper half and above the now rising 50-day moving averages. A couple of higher lows have now been formed.
Yesterday saw the U.S. dollar manage to bounce back a little shortly after the New York open, while U.S. stock indices filled their weekend gaps as they recovered from heavy losses. Perceived safe-haven gold eased off its highs but still closed higher on the day. Today, U.S. index futures are currently pointing to a slightly weaker open, with European markets struggling to hold onto their earlier gains.
Is the Trump honeymoon over? That is the question being asked today after the breaking news late last week and what has dominated attention over the weekend with this being that President Trump was defeated in his quest at replacing Obamacare. The result of the Trump healthcare bill was not in line with market expectations, but more importantly it has made the markets begin to get nervous about what other possible hurdles Trump could potentially face when it comes to implementing other aspects of his campaign agenda.
It is not the failed healthcare bill itself that has caused all these market moves. Yes that may well have been the trigger, but investors are worried about the challenges Trump will face in trying to get his other policies passed which may well limit the government’s fiscal spending. The worry is that only will this weigh on GDP, but potentially on inflation too. Thus, the Fed may not raise interest rates as aggressively as had been priced in, hence the falls in the dollar.
Sterling has staged a remarkable rebound this week with bulls almost rebelling against the Brexit woes by propelling the British pound (GBP/USD) currency pair above 1.2500 during Thursday’s trading session. The dollar’s persistent weakness combined with February’s blockbuster retail sales figure of 1.4% may have created an illusion of a bullish bias returning to sterling.
Earlier, data from the ONS showed consumer price inflation in the UK rose to its strongest level in nearly three-and-a-half years to 2.3%. The pound’s reaction was swift. The British pound/U.S. dollar (GBP/USD) currency pair jumped to 1.2470 while the EUR/GBP slumped to 0.8655. The GBP has since eased back a little but remain near the day’s highs, which suggest more gains are likely.
The GBP/USD has hit a fresh post-FOMC high this afternoon. Like the Bank of Japan and Swiss National Bank, the Bank of England decided to keep its monetary policy unchanged. But it wasn't a unanimous decision as Kristin Forbes voted for a 25 basis point rise amid concerns over inflation. This caused the pound to jump across the board.