Daily Forex Market Preview, 02/03/2018
The U.S. dollar whipsawed yesterday after the Fed Chair, Jerome Powell returned to testify to the U.S. Congress as part of the two day semi-annual testimony. In his recent remarks, Powell said that there were “no signs of wage inflation” as yet but more gains can come before inflation starts to rise. Powell also said that the labor market could continue to strengthen without causing inflation to rise.
The remarks were seen to be toned down compared to the first statement where the markets understood Powell’s comments to be more hawkish.
The U.S. President Trump announced yesterday that new tariffs for steel and aluminum imports would come into effect next week. The U.S. is set to raise the tariffs on imports by 25% and 10% respectively. The equity markets reacted strongly by closing weaker on the day.
On the economic front, the Fed’s preferred gauge of inflation, the core PCE price index was seen rising 0.3% on the month, matching estimates and accelerating from 0.2% previously. The ISM manufacturing PMI accelerated to 60.8 beating estimates of 58.7 and extending from January’s 59.1.
Looking ahead, the economic calendar today will see the release of the UK’s construction PMI. Economists forecast a print of 50.5 which is slightly higher from January’s 50.2 print. The British PM May is expected to speak later today while the BoE Governor Carney is also scheduled to speak.
GBPUSD intra-day analysis
GBPUSD (1.3781): The British pound braces for a volatile day as the British Prime Minister Theresa May and the BoE Governor, Mark Carney are expected to speak today. Following the strong declines earlier this week, GBPUSD managed to stabilize as price action was seen closing with a spinning bottom pattern on Thursday. This could suggest some near term upside in GBPUSD. A reversal could potentially signal an upside correction as price action could be seen rising towards 1.3900 where resistance is likely to be established.