Daily Forex Market Preview, 21/03/2018
The U.S. dollar was seen pushing higher on the day reversing the gains from Monday’s declines. Investors were seen bracing for the Fed meeting due later in the day. Although the markets have fully discounted a 25 basis point rate hike, the Fed’s dot plot and economic projections will play a key role in shaping the sentiment in the USD going forward. For the moment, the markets are expecting Fed officials to play it safe with three rate hikes this year.
Ahead of the Fed meeting, the UK’s jobs data will be on the line. The three month average earnings index is forecast to rise 2.6%, slightly accelerating from 2.5% seen before. The UK’s unemployment rate is expected to remain unchanged at 4.4%.
Economic data from Tuesday included the annual inflation data from the UK. According to official reports, the UK’s headline inflation rate was seen slowing to a pace of 2.7% which was more than expected and inflation was seen easing from January’s print of 3.0%. Core inflation rate also slipped to rise just 2.4% down from 2.7% previously. The data builds up to this Thursday’s BoE meeting where the odds of a hawkish signal from the Bank of England have increased.
GBPUSD 21-03-2018 Intra-day analysis
GBPUSD (1.4015): The British pound was seen pausing its rally following Monday’s news about the transitory Brexit deal. The weaker inflation data did not help the sterling much as price action was confined to Tuesday’s range. Support at 1.3902 remains in play and we expect to see this level to be tested in the near term. The UK’s labor market data will of course bring some volatility ahead of the Fed meeting. In the near term, GBPUSD is likely to maintain the range of 1.4060 – 1.3902 level ahead of the Bank of England meeting that is due on Thursday.