British pound holds the bounce as US dollar pauses with Fed firm on 2% inflation goal

The UK and US markets

The British pound has eased a touch today after solid gains on Monday with the outline of a trade pact that can deal with the Northern Ireland situation.

Referred to as the Windsor Framework, it is designed to allow Northern Ireland smooth access to both the European Union and Great Britain economic zones.

The US dollar dipped yesterday in line with an easing of Treasury yields and currency markets have had a fairly subdued day so far.

Overnight, Federal Reserve Governor Philip Jefferson said that there is no easy way to get to the 2% inflation target but that the target should remain in place. He highlighted that any change in the target could set a precedent for further opportunistic adjustments.

APAC

Hong Kong exports y/y to the end of January were -36.7%, far below the 27.6% forecast. This negative data print was offset to some degree by the lifting of mask-wearing restrictions that had been in place for 945 days.

The Hang Seng Index (HIS) stayed mostly in the green, as did broader Chinese equity indices.

Australia’s ASX 200 also was slightly firmer after strong local data. The fourth quarter current account surplus came in at AUD14.1 billion against AUD 5.5 forecast and the previous print was revised up to AUD 0.8 billion from AUD -2.3 billion. Month-on-month retail sales for January were up 1.9% rather than 1.5% anticipated and -4.0% prior. AUD/USD was little changed on the news.

Japan’s data was mixed today with retail sales m/m for January being 1.9% higher, beating estimates of 0.4% but industrial production was -4.6% for the same period, below the -2.9% forecast. The Nikkei 225 index is up by a small amount while USD/JPY (大口） also hardly moved.

Crude continues to trade within recent ranges with the WTI futures contract near US$ 76 bbl and the Brent contract tracking above US$ `82.50 bbl. Spot gold has also had a quiet day, trading near US$ 1,815 an ounce at the time of going to print.

France and Canada will see GDP figures today and there will be a number of central bank speakers from both sides of the Atlantic crossing the wires.

GBP/USD technical analysis

GBP/USD has been in a 1.1842 – 1.2448 range for three months and has bounced off recent lows to start this week. Support might be at the breakpoint and prior lows in the 1.1900 – 1.1925 area ahead of the previous low of 1.1842.

On the topside, resistance could be at the prior peaks of 1.2148 and 1.2270 ahead of a cluster of highs in the 1.2407 – 1.2448 zone.

GBP/USD daily chart

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