- Economic data will help Sterling traders.
- GBP / USD finding support from the long-term moving average.
Sterling has recovered around half of its recent losses against the US dollar after UK rate cut expectations were pared back last week. Aggressive expectations of over 110 basis points of cuts have been trimmed back to just over 80 basis points of cuts this year, boosting UK gilt yields. The yield on the interest-rate sensitive 2-year gilt today touched 4.60%, up from around 4.20% at the start of February and a 3.965% low at the end of December. This hike in short-term government bond yields should have pushed Sterling higher against a range of other currencies but so far this has failed to happen.
UK 2-Year Gilt Yield
This week’s economic calendar may help Sterling to find a more supportive footing with the latest jobs, inflation , and growth data all set to be released. This data will give the Bank of England, and the markets, a clearer picture of the UK economy. If inflation, and the jobs market, remain stickly, the BoE will likely signal that rates will remain higher for longer, boosting the values of Sterling, while weaker data may see GBP fall further. At least by Thursday this week traders will have more data to use before taking any Sterling-related position.
Cable is currently testing 1.26 big figure support, a level that was sharply broken and then quickly regained at the start of last week. GBP/USD also traded below the 200-day simple moving average for the first time since mid-November, but again this technical indicator was quickly regained. GBP/USD bulls may find it difficult to push above the 1.2662/1.2673 level, unless this week’s data is supportive, while last Monday’s low of 1.2519 should hold short-term selling pressure.
GBP/USD Daily Price Chart
Retail trader GBP/USD data show 48.49% of traders are net-long with the ratio of traders short to long at 1.06 to 1.The number of traders net-long is 7.24% higher than yesterday and 18.75% lower than last week, while the number of traders net-short is 1.17% higher than yesterday and 38.56% higher than last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.
EUR /GBP continues to trade below a prior level of support around 0.8549 as the Euro weakens further. All three simple moving averages are in a bearish formation and the pair may re-test the recent multi-month low at 0.8513. Below here, 0.8503 comes into focus.
EUR/GBP Daily Price Chart
