Home ForexForecasts GBP/USD – Breaks key support amid strong US economic numbers

GBP/USD – Breaks key support amid strong US economic numbers

by SuperiorInvest
  • Traders lower rate cut expectations after strong US data
  • UK households remain cautious about spending in December
  • GBP/USD breaks the quadruple neckline top

The US economy is going from strength to strength, complicating the Federal Reserve’s intentions to cut interest rates several times this year.

Friday’s jobs report was red hot, with the wage component particularly problematic from the central bank’s perspective as it looks for more evidence that inflation is sustainably returning to its target.

Monday’s services PMI further reinforced the picture of an economy that is going from strength to strength, not buckling under the pressure of high interest rates.

While the central bank can meet its inflation target with a strong economy, it will only encourage authorities to cut rates with extreme caution for fear of overheating the economy and causing another inflation headache.

On the other hand, data from the United Kingdom continue to paint the picture of an economy that is stagnating, albeit with a tight labor market and strong inflationary pressures. The BRC’s retail sales monitor highlighted weakness in spending during the holiday season, a sign of how careful households remain with their finances.

GBP/USD breaks important support

had been consolidating over the last month and a half, but recent US data appears to have put an end to that.

GBP/USD-Daily Chart

Source – OANDA

A move below 1.26 has broken the neckline of a quad top and is now testing that level from below. A failure to break above again could be seen as a confirmation of the initial breakout, reinforcing the bearish move.

GBP/USD 4-hour chart

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