Daily Market Recap - GBPUSD

The British Pound is under pressure for a second consecutive session in mid-week trading after a mixed bag of economic results in the UK combined with a record-breaking US retail sales growth figure in May sent the cable trading lower, down 0.44 percent at the time of writing.

UK inflation data was released on Wednesday, with the consumer price index coming in at a 0.5 percent increase during the month of May, slightly lower than the 0.8 percent witnessed in the previous month. The rate of inflation is decreasing in the UK, suggesting the Bank of England may look into new measures to prop up the British economy such as further quantitative easing purchases.

Risk sentiment has taken a downturn in the past few days after news of an uptick in new coronavirus infection cases in the US and China hampered demand for riskier assets. Furthermore, the flare-up in tensions between the two Koreas as well as the Kashmir border dispute between China and India helped increase demand for the safe havens.

From a technical point of view, the GBPUSD will likely see further downside price action as momentum begins to shift in favor of the bears. The seller's target will be to close firmly below the immediate 1.25260 support level and test the 0.5 Fibonacci retracement mark at 1.24390 in order to substantiate their claim.

On the upside, any weakness in the USD may send the pair trading higher, though gains will likely be capped at the 1.26337 resistance level, which has kept any rises in check in the past week. Risk sentiment will have to improve in order for traders to take a gamble on the British pound in the short run.

(Chart Source: Tradingview 17.06.2020)

Looking ahead, the issues of the Brexit negotiations should resurface in the coming weeks, with UK Prime Minister Boris Johnson eager to come to an agreement before the end of the year in order to avoid any more delays. However, analysts remain pessimistic over the speed in which the negotiations will be able to be conducted. Strong headwinds await the British pound in the medium run, likely to last up until the end of 2020.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.