EUR/GBP rises on ECB day! S&P500 awaits jobless claims and tomorrow's inflation data.
EUR/GBP rises on ECB day!
EUR/GBP is rising, extending gains from the previous session.
The euro found support from an upward revision to Q1 GDP o 0.6%. Meanwhile, the pound came under pressure after the OECD said that the UK would see the slowest growth of developed countries.
Today all eyes are on the ECB, which is expected to end net asset purchases and tee up a July rate hike. The question is, how big? Currently, most of the governing council supports a 25 basis point rate hike next month, which is priced in, although support for an outsized hike appears to be growing.
With CPI at 8.1% and PPI at 37%, in addition to oil prices rising back over $120 per barrel, inflation could still rise further. Staff projections are expected to show slower growth and an upward revision to inflation.
A hawkish ECB and the prospect of entering a brand new tightening cycle could lift the EUR, especially against the crosses.
Where next for EURGBP?
EURGBP has been trending higher, forming a series of higher highs and higher lows. The price trades over its 2-month rising trendline and above its 20 & 50 sma. The RSI is above 50 and supportive of further upside.
Buyers are currently testing resistance at 0.8550, with a break above here opening the door to 0.86, the June high, and then bringing 0.8620, the 2022 high, into play.
On the flip side, sellers will be looking for a move below the 20 sma at 0.85, which has offered strong support over the past few weeks.
A break below here could see support at 0.8480, the May 26 low tested, exposing the 50 sma at 0.8440.
S&P500 awaits jobless claims, CPI data
US stocks ended lower yesterday, and futures are heading lower again. Concerns over inflation, slowing global growth, and the impact of tighter monetary policy are hurting risk sentiment.
The OECD cut global growth forecasts to 3%, down from 4.5% in December
More robust than expected, Chinese trade data has failed to lift the mood. Exports rose 16.9%, and imports rose 4.1%. Concerns over new lockdown restrictions in Shanghai are overshadowing the data.
US initial jobless claims data will be in focus in an otherwise quiet afternoon session. Initial claims are expected to rise to 210k, up from 200k. The markers will be watching closely for any signs that the US labor market is starting to weaken. Higher than forecast initial claims could weaken sentiment further.
That said, investors could be cautious about taking on big positions ahead of tomorrow’s key inflation data.
Where next for the S&P 500?
The S&P 500 is consolidating, capped on the upside by 4200 and on the lower side by 4070. The RSI is neutral as the market awaits its next catalyst.
Buyers will look for a move over 4200, the June high and the 50 sma, opening the door to 4300, the May high.
Sellers will be looking for a move below 4070, the weekly low, and 20 sma, ahead of 400 round number, before bringing 3814 back into target.
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