The sterling influenced positively from U.K.’s inflation report which revealed an even better than expected rising of consumer prices. The consumer prices rose 1.6% in December, compared to last December, approaching BoE’s 2% target at a slow pace. It’s remarkable that International Monetary Fund (IMF) increased U.K. economic growth forecast for 2017 to 1.5% from 1.1% was initially forecasted, following the better than expected GDP growth since Brexit vote.
All eyes on U.K. Prime Minister Theresa May’s speech now, which is anticipated to speak on Brexit in a couple of hours. May supports “hard Brexit”, which means the U.K. will refuse to be in a tariff-free trade relationship with the European Union in return to have control of immigration. PM supports that the “hard Brexit” is in benefit of the U.K., thus a convincing justification of her believes, amid pessimistic expectations, may bolster the currency further. Investors know the plan of “hard Brexit” thus, it will be no surprise May to repeat it once more. Moreover, the speculations over Britain to be out of the single market may have already digested in the market and good news keep coming up for the currency shows a strong economy.
GBP/USD – Technical Outlook
The GBP/USD plunged more than 20% against the U.S. dollar since EU Referendum in June. Sterling opened with a gap to the downside in a previous session and almost challenged the 31-year low at 1.1986 ahead of Prime Minister Theresa May’s speech later today, who plans to speak about Britain’s exit from the European Union.
Currently, the pair cover all the losses from the gap during the release of the consumer price index and it approached the 50-SMA, on the 4-hour chart, which seems to be a strong resistance obstacle. However, we expect the price to surpasses above the aforementioned obstacle and hit the 100-SMA near 1.2320 or moreover, the descending trend line on the short-term timeframe. Technical indicators are confirming the recent bullish attitude as both are moving higher. The RSI indicator is sloping upwards while it entered into the positive path. The MACD oscillator is still moving into the negative path, however, it created a bullish crossover with its trigger line.
