GBP/USD Forecast Jan. 25-29 2021 – UK Inflation Boosts Pound

10 and one 10 us dollar bill

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GBP/USD posted considerable gains last week. The upcoming week has three releases, highlighted by key employment reports. Here is an outlook for the highlights and an updated technical analysis for GBP/USD.

In the UK, inflation improved to 0.6% in December, up from 0.3%. CBI Industrial Order Expectations and GfK Consumer Confidence remained deep in negative territory, with readings of -28 and -28, respectively.

Retail Sales rebounded from a previous decline but just barely, with a reading of 0.3%. This was well shy of the estimate of 1.4%. The December PMIs highlighted a tale of two sectors, as manufacturing came in at 52.9, indicating expansion. Services, however, continues to contract, and slowed to 38.8 points.

In the US, the Philly Fed Manufacturing Index climbed to 26.5 in January, up strongly from the previous reading of 11.1 and well above expectations. Unemployment claims dropped to 900 thousand, down from 965 thousand and below the forecast of 930 thousand. The week wrapped up with the Manufacturing PMI, which rose to 59.1, up from 56.5. This was its highest level since May 2007 and it points to strong expansion.

GBP/USD daily graph with resistance and support lines on it. Click to enlarge:

  1. Employment Report: Tuesday, 7:00. Wages have accelerated for four straight months, coming in at 2.7% in November. The upswing is expected to continue, with a forecast of 3.0%. Claimant Change jumped to 64.3 thousand, and the markets will be hoping for a lower reading. The unemployment rate has been creeping higher and is expected to climb to 5.1%.
  2. CBI Realized Sales: Tuesday, 11:00. Sales volume improved to -3 in December, its best reading since July. Will we see the uptrend continue?
  3. BRC Shop Price Index: Wednesday, 00:01. This inflation gauge of price movement in BRC shops continues to show negative readings, coming in at -1.8% in the past two readings.

GBP/USD Technical Analysis

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