February 15, 2022 11:11:27

Sterling has shown some decent resilience against the safe haven bid for the dollar in recent sessions. More peaceful signs from Moscow this morning are also helping risk assets in general, as the greenback moves around its 50-day SMA on a trade-weighted basis on the DXY.

This week sees the mid-month data dump in the UK with today’s jobs data continuing to support more rate hikes from the Bank of England in the coming months. The unemployment rate held steady and in line with estimates at 4.1%, while wage growth accelerated in December, though real wages are falling. We get CPI data tomorrow with the headline expected to rise to 5.5%, after the 5.4% print in December, a near 30-year high.

Bu the inflation problem in the US seems to be broader and more demand driven in the US than the UK. The market is pricing in nearly six rate hikes from the BoE this year. These would come at a particularly acute time for UK consumers with the energy price cap increases, higher mortgage costs and tax rises squeezing incomes.

GBP/USD trades in a narrow channel

Cable has tracked sideways for most of this month holding above the 100-day SMA and trendline support from the June 2021 high. This area around 1.35 is key near-term support with the 50-day SMA just below here at 1.3470. The January dip at 1.3357 may come quickly if we get a stronger breakdown out of protracted range trading. Increased geopolitical tensions would likely trigger these losses.

Buyers need to get above resistance at 1.3575 and then 1.36 to push higher. A bumper CPI print could potentially bring the chance of a 50bp rate hike into play. The 200-day SMA at 1.3692 lingers above along with this year’s high at 1.3748.