26/07/2024
Written by: Ian Morley
Summary:
GBPEUR made another attempt to reach the 2023/2024 highs yesterday afternoon but again failed to surpass this key level. GBPUSD exhibited similar upward movement, reaching a new 2-month high before retreating as European trading closed. The latest ECB survey data indicated that 3-year CPI expectations were revised down to 2.4%, suggesting a longer-term easing of inflation more than previously anticipated.
Speeches:
Market Insight:
A quiet day is expected with no significant economic events on the calendar. Clients have capitalised on the GBPEUR rally to the 2023/2024 highs, hedging against the possibility that recent GBP gains may be overextended. A similar sentiment was observed among our GBPUSD clients, although some have set limit orders near the 2024 highs in anticipation of the core PCE inflation numbers due on Friday, aiming to benefit from continued USD weakness towards the end of the month.
This morning, the USD is slightly stronger, following a rise in treasury yields overnight.
Analysis:
GBP has shown an impressive performance since 22nd April, with the Bloomberg GBP Index gaining 2.77% since then. However, these gains may now be overextended if technical analysis is to be trusted. RSI (Relative Strength Index), a technical analysis indicator that measures the speed and magnitude of an asset’s price changes to identify overbought (above 70) or oversold (below 30) conditions. Applied to the GBP Index, the RSI currently indicates that GBP is overvalued and may be due for a retracement, based on past price actions when the reading exceeded 70.