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GBP/USD rises ahead of BoE’s Bailey speech. DAX rises ahead of German inflation data.
 

GBP/USD rises ahead of BoE’s Bailey’s speech

• BoE’s Bailey to speak at the cost of the living conference
• US ISM manufacturing PMI to rise to 48
• GBP/USD caught between 50 & 200 sma

GBP/USD is rising, reversing losses from the previous session, pushing above 12050 amid an upbeat market mood.

Stronger-than-expected Chinese PMI data and optimism surrounding the Northern Ireland post-Brexit trade deal, which eliminates the risk of a trade war with Europe, are lifting the pound.

Meanwhile, The US dollar is starting March on the back foot after strong gains in February, the first monthly gain for the dollar since September last year. Weaker than forecast consumer confidence and Chicago manufacturing PMI fuel optimism that the Fed’s interest rate hikes could be starting to take effect. Will today’s US ISM show a similar trend? Expectations are for a rise to 48 in February up from 47.4.

Investors will now look toward a speech by Andrew Bailey at the cost-of-living crisis conference. Comments on inflation, the economy, and hints regarding the future path of monetary policy could be on the cards. Any hawkish commentary could boost the pound.

Prior to the speech, UK manufacturing PMIs could draw some interest. The PMI rose from 47 to 49.2 in February, with the level 50 separating expansion from contraction.
 

Where next for GBP/USD?

GBP/USD trades caught between the 50 and 200 sma in a holding pattern, with the RSI around 50, a neutral level, providing few clues. Waiting for a breakout trade could be the way forwards.

Buyers could look for a break above the 50 sma at 1.2140 to bring the February 14 high of 1.2270 into play. A rise above here could see the pair target 1.24 the February high.

Sellers could look for a break below the 200 sma at 1.1920, with a break below here opening the door to 1.1840 the 2023 low.

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DAX rises ahead of German inflation data

• Chinese manufacturing PMI jumps to 52.6
• German manufacturing PMI & inflation data due
• DAX consolidates between 15550 & 15185

The DAX, along with other European peers pointing to a higher open on Wednesday, lifted by signs of an economic recovery in China's manufacturing sector.

The manufacturing PMI jumped to 52.6, its fastest growth in a decade after the relaxing of Covid restrictions. China is a key trade partner in Europe and, more specifically, Germany, so a strong recovery in the economy there bodes well for the German economy.

Today's attention will also be on German manufacturing PMI data, which is expected to confirm the preliminary reading of 46.5 in February, down from 47.3 in January.

German inflation data will also be under the spotlight and is expected to cool to 8.5%, down from 8.7%. The data comes after France & Spain saw inflation unexpectedly rise in February. Hot inflation could pile pressure on the ECB to hike rates aggressively, hitting demand for stocks.
 

Where next for the DAX?

The DAX has fallen out of a rising channel dating back to early January and trades in a holding pattern, capped on the upside by 15550, last week’s high, and on the lower side by 15185, last week’s low.

Again, it could be prudent to wait for a breakout. Buyers could wait for a rise above 15550, and 15650 the February high, to target 15745, the February 2022 high.

Sellers could wait for a move below 15185, which exposes the 50 sma at 15000 and the mid-January low. Beyond here 14700 the December high.

(Click on image to enlarge)

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