Summary

Last week was a solid week for pound bulls, trading higher against every major currency counterpart; moving over 400 pips against the yen as well as the dollar, and moving over 700 pips against the Canadian dollar. Apart from falling Gilt prices, positive data out of the consumer price index and claimant count change; last week’s pound bullishness was mainly driven by what PM Theresa May had to say during her Brexit speech Tuesday. “although she signaled plans for a hard exit, investors were relieved that there is a clear step forward. Unfortunately, her policies won’t be kind to the U.K. economy, especially in the near term as Britain will not be seeking partial membership for the EU and it won’t be participating in the single market. The good news is that the government will put the deal to a vote in Parliament and May has stressed that she will do her best to avoid a disruptive Brexit cliff-edge by aiming for a phased transition.” FULL ARTICLE HERE . The UK Supreme Court will be delivering its verdict on article 50 this coming Tuesday, and investors will be keeping a close eye. Apart from that, news for this coming is relatively light, with the exception of Governor Carney’s speech on Wednesday and Thursday’s GDP results.

Technical Summary

GBP/USD; price opened at 1.19950 and closed higher at 1.23601 ( pound stronger)
GBP/JPY; price opened at 137.088 and closed higher at 141.505 ( pound stronger)
EUR/GBP; price opened at 0.88495 and closed lower at 0.86533 (pound stronger)
GBP/CHF; price opened at 1.21086 and closed higher at 1.23883 (pound stronger)
GBP/CAD; price opened at 1.57591 and closed higher at 1.64714 (pound stronger)
GBP/AUD; price opened at 1.6029 and closed higher at 1.63658 (pound stronger)
GBP/NZD; price opened at 1.6898 and closed higher at 1.72487 (pound stronger)

News Releases; week 16th-20th Jan, 2016

Core CPI (YoY) (Dec); Higher than expected
Core PPI Output (YoY) (Dec); Lower than expected
Core PPI Output (MoM) (Dec); Lower than expected
Core RPI (MoM) (Dec); Higher than expected
Core RPI (YoY) (Dec); Higher than expected
CPI (YoY) (Dec); Higher than expected
CPI (MoM) (Dec); Higher than expected
House Price Index (YoY); Higher than expected
PPI Input (YoY) (Dec); Higher than expected
PPI Input (MoM) (Dec); Lower than expected
PPI Output (MoM) (Dec); Lower than expected
PPI Output (YoY) (Dec); Lower than expected
RPI (MoM) (Dec); Higher than expected
RPI (YoY) (Dec); Higher than expected
Average Earnings ex Bonus (Nov); Higher than expected
Average Earnings Index +Bonus (Nov); Higher than expected
Claimant Count Change (Dec); Higher than expected
Unemployment rate (Dec); No change
RICS House price Balance (Dec); Lower than expected
BRC Retail Sales Monitor (YoY) (Dec); No change
Core Retail Sales (MoM) (Dec); Lower than expected
Core Retail Sales (YoY) (Dec); Lower than expected
Retail Sales (MoM) (Dec); Lower than expected
Retail Sales (YoY) (Dec); Lower than expected

Upcoming News Releases; week of 23rd Jan to 27th, 2016

Tuesday; Public sector Net Borrowing (Dec), Public sector Net Cash Requirement (Dec)
Wednesday; CBI Industrial Trends Orders (Jan), BoE Gov Carney Speaks
Thursday; BBA Mortgage Approvals, GDP (QoQ)(Q4), GDP (YoY)(Q4)

Price Chart Technical Overview

GBP/USD Daily chart

Price had opened the week below MS1 around the 1.20000 mark, after having gapped down over the weekend. Price had previously been moving in a downtrend, shown by the black line, and downward arrows. However prior to and during May's speech the pound gained tremendous strength, shown by the large bullish engulfing candle, closing the gap, breaking the downtrend line, (shown by the upward arrow), and possibly causing a shift of trend, to the upside. If that is the case, target from MS1 is MR1. price has found minor support at MM2, around the 1,2262 area, which is a bullish entry zone.

UK10YBGBP Daily chart

price has been trading in a range between 126.495 and 124.665 for most of last week, shown by the black horizontal lines. We have seen a downside break of this range, whereby price has closed the week at 124.194. signalling a drop in prices, and thus a rise in yields.

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