Daily Market Recap - GBPUSD

The British pound is gaining against the US dollar on Thursday, almost fully reversing yesterdays 1.12 percent drop. The pair is up 0.97 percent at the time of writing on the back of widespread weakness in the greenback following the sharp recovery in the dollar index in the previous session.

The US dollar showed early signs of a looming correction ahead of the US Feds FOMC meeting minutes released yesterday evening after initially attracting strong bids. The document reiterated expectations of further monetary easing to be expected in the near future, consequently weighing on the greenback.

Global equities were largely in the red after the release of the minutes as the Fed stressed economic uncertainties continue to plague the country and further downside risks from the COVID-19 pandemic are yet to be felt.

Meanwhile, the Nasdaq composite continues to build on record highs as investors show signs of panic-like buying behavior on Thursday. Traders may be looking towards tech firms as a stronger and more effective hedge against the gloomy economic outlook than gold.

Over in the UK, July inflation figures released on Wednesday surprised the market coming in above expectations at a solid 1 percent increase year over year versus the analyst consensus of 0.6 percent. Core inflation is also stronger than expected, recording its best performance since July 2019.

Meanwhile, traders will be looking ahead to the UK retail sales figures and Markit manufacturing PMI to be released on Friday as an indicator of the rate of economic recovery in the UK.

From a technical perspective, the GBPUSD has crossed above the 1.31858 resistance level and may move towards a test of the 1.32671 high set on Wednesday. The main trend in the pair remains down on the daily chart though a close above the 1.32 handle may see a return to bullish momentum.

(Chart Source: Tradingview 20.08.2020)

Bulls will be looking to hold onto gains above the 1.32671 mark in order to bolster confidence in the pair for a move higher in the coming sessions. Failure to do so may trigger a stronger correction below the 1.31 mark, with the immediate support zone of 1.30771 likely sets to offer some downside protection in the near term.

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.