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GBP/USD rises ahead of US inflation data. DAX rises despite a deeper Q4 contraction & as consumer confidence improves.
 

GBP/USD rises ahead of US inflation data

• UK GFK consumer confidence rises to -38 vs -43 forecast
• US Core PCE to fall to 4.3% YoY from 4.4%
• GBP/USD trades caught between 50sma & 200sma

GBP/USD is pushing higher after two days of losses after stronger-than-expected UK consumer confidence data and as investors look ahead to the release of US core PCE data.

UK consumer confidence rose to the highest level since April in a sign of consumer resilience despite the ongoing cost of living crisis.

The GFK consumer confidence index rose to -38, up from -45 and ahead of forecasts of -43. The data comes as the UK economy avoided a contraction in Q4 and as the labor market remains tight.

Attention now shifts towards the US cool PCE reading, the Fed’s preferred gauge for inflation, which is expected to show that inflation cooled to 4.3% YoY in January, down from 4.4%. However, on a monthly basis, the index is expected to rise to 0.4%, from 0.3%.

Hotter than forecast inflation, combined with a recent series of strong data and hawkish-sounding Fed policymakers, could raise bets of further rate hikes from the Fed and lift the USD.
 

Where next for GBP/USD?

After breaking below the rising trend line dating back to early October, GBP/USD is trading in a consolidation pattern, capped on the upside by the 50 sma 1.2170 and by 1.1930, the confluence of the 100 and 200 sma on the lower side.

The RSI is below 50 which favours a break below here, which could prove a tough nut to crack, opening the door to 1.1840 the 2023 low.

On the upside, buyers could look for a rise above the 50 sma, which has capped the price since the start of the month, with a break above here bringing 1.2270 the February 14 high into focus, ahead of 1.24 the February high.

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DAX rises despite a deeper Q4 contraction & as consumer confidence improves

• German Q4 GDP was -0.4%, down from 0.5% in Q3
• German consumer confidence rises to -30.5 from -33.5
• DAX consolidates around 15500

The DAX, along with its European peers, is heading higher at the end of the week and on the anniversary of the Russian invasion of Ukraine. Across the year, European markets recovered all their losses and some only slightly higher; however, U.S. stock markets remain broadly lower.

Shrugging off German GDP data, which was revised lower with the Q4 GDP falling -0.4% QoQ, revised lower from -0.2% and down from 0.5% in Q3.

Meanwhile, German Consumer morale improved in March, rising to -30.5, up from -33.5, thanks to lower energy prices, cooling information, and hopes that the economy could avoid a recession.

Looking ahead, US inflation data is likely to drive risk sentiment later in the day. Hotter than forecast, US inflation could raise fears of higher rates for longer.
 

Where next for the DAX?

The DAX continues to trade within an ascending channel, although the bulls appear to be losing momentum, and the price has hit a consolidation phase, capped on the upside by 15550 the weekly high and on the lower side by 15240 the weekly low.

The RSI remains above 50, which along with the price remaining above the upward-sloping trendline, keeps buyers hopeful of further upside.

Buyers will look for a rise above 15550 to extend gains towards 15650 and a 2023 high.

Sellers could look for a break below 15450 for a lower low, ahead of 15000 round number and to expose the 50 sma at 14910.

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