Rebound extends to a second day
GBP/USD looks poised to extend the rebound from more than two-year lows today with near-term trendline support holding for now. Traders are awaiting the retail sales data for June, which are due in just under an hour’s time, are expected to show another month-on-month decline. Forecasts are for a -0.3% m/m reading, an improvement from May’s -0.5% but still the second contraction in a row.
GBP/USD is now at 1.2457, a 0.6% gain from yesterday’s low of 1.2382, the weakest since April 2017. A downward sloping trendline from the May 23 low appears to be offering tentative support for now, but that could all change with a weaker-than-expected retail sales number.
GBP/USD Daily Chart
More doves fly to the cote
A couple of Asian central banks joined the growing breed of rate-cutting authorities today. First off, in an unexpected move, the Bank of Korea trimmed its benchmark rate by 25bps to 1.50%. The decision was not unanimous among the board members, with one members preferring to keep rates unchanged while the majority of analysts polled had expected the Bank to remain on hold, preferring to wait until the Fed had made its move.
At the same time, the Bank cut its 2019 GDP growth forecast to 2.2% from 2.5%, mostly due to slower exports, and provided initial guidance for 2020 at 2.5% to 2.6%. The inflation forecast was cut to 0.7% for this year from 1.1% and is seen gradually rising during 2020 to the mid-1% levels.
A few minutes ago, Bank Indonesia also trimmed its benchmark by 25bps to 5.75%, the first cut since September 2017. In this case it was widely expected and came amid a low inflation forecast and a need to support economic growth momentum. Looking forward, the Bank maintained its 2019 GDP growth forecast at 5.0%-5.4% and maintained its inflation forecast for this year unchanged at 2.5% to 4.5%.
Fed speakers likely to stick to the script
The US data slate has only second-tier data with the Philadelphia Fed manufacturing survey seen rebounding to 5.0 in July after a disappointing 0.3 reading in June. We also have speeches from Fed’s Bostic and Williams, a dove and a hawk respectively, who are unlikely to contradict the Fed’s current guidance of a rate cut this month.
The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/
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A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
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