British Pound, GBP/USD, US Dollar, Crude Oil, Hang Seng, ASX 200 – Talking Points
- The British Pound is on hold for now as the market awaits US CPI
- APAC equities moved higher, supported by news reports of state buying
- All eyes on Thursday’s US CPI.Will USD dominate GBP/USD?
The British Pound has been inching higher this week after last week’s volatility in the aftermath of the Bank of England’s (BoE) rate hike and the ECB’s hawkish pivot.
We will hear from the BoE’s economist Huw Pill later today, but all eyes are on US CPI on Thursday. The market is anticipating a headline annual rate of 7.3%.
Currencies have had a fairly quiet day in Asia, with the US Dollar losing some ground across the board while the Australian and New Zealand Dollars had some gains.
This was despite iron ore sliding on the back of Chinese authorities warning market players not to provide false price information.
APAC equities followed on from the positive Wall Street lead, with all indices in the green today. Hong Kong’s Hang Seng Index (HSI) was the best performer, up over 2%.
This is after China’s state funds were reported to have bought Chinese stocks in the Asian session yesterday and again in the North American session.
The buying in the US is done through what is known as American Depository Receipts (ADR). They allow for foreign companies to be able to trade on US exchanges.
The funds doing the buying are known as the “national team.” It is believed that the objective of the purchases is to provide liquidity and smooth volatility, rather than influence price. Nevertheless, Chinese equities have been weakening so far this year.
Meanwhile, Australia’s ASX 200 was up around 1% despite the Westpac consumer confidence index slipping a touch to 100.8 in February, against 102.2 previously. The index was helped along by CBA, Australia’s largest bank, reporting better than expected earnings before the open.
US equity futures are looking at a slight lift for their open today.
While equities were rallying, bonds continued to sell off, with yields marching higher. US 10-year Treasury rates remain near 1.95% and 2-years are around 1.33%.
Crude oil continued to steady today after pulling back from the highs seen last Friday. A report out overnight from the American Petroleum Institute (API) showed an inventory drop of 2 million barrels in US storage last week.
Japan announced that it will send LNG to Europe should the Ukraine situation deteriorate. It would do this only after all of its own energy needs had been met, however.
Gold continued to inch higher, trading near US$ 1,828 per ounce.
Looking ahead, after a round of speeches from BoE and the ECB officials, a number of Fed speakers will cross the wires. Some commentary from the BoC is due as well.
GBP/USD Technical Analysis
GBP/USD has been ticking up this week and the 10-day simple moving average (SMA) appears to be crossing the 100-day SMA. This which would signal a Golden Cross. This might indicate that bullish momentum could evolve.
Resistance may lie at the previous highs of 1.3628, 1.3749 and 1.3834. The 260-day SMA might also offer resistance, currently at 1.3744.
Support could be at the pivot point at 1.3359 and the previous low of 1.3161.
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter