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Mar 22 - 09:55 PM

GBP/USD - COMMENT-Charts Support Resilient Sterling Into UK Budget Update

By Andrew M Spencer  —  Mar 22 - 08:50 PM

Sterling remains resilient, falling just 1.2% against the U.S. dollar in March, despite a sharp rise in yield differentials, and the charts support further gains.

Ten-year gilt yields have climbed 27 basis points in March as inflation rises, while the Bank of England surprised markets with a dovish rate hike last week nL5N2VK3VO. By contrast, 10-year Treasury yields have jumped 71 basis points on the Federal Reserve's hawkish reversal nL2N2VP1BM.

There is plenty of event risk in London Wednesday, with February CPI expected to headline at 5.9% after rising 5.5% in January, and forecasts of 8% in coming months.

Finance minister Rishi Sunak will deliver his budget update amid the uncertainty of the Ukraine conflict and soaring inflation.
Consumers and businesses expect help as the economy recovers from COVID, while debt servicing costs and energy prices jump.
It will be a fine balancing act nL5N2VP4GM.

Technically, GBP/USD momentum studies rise - 5, 10 and 21-day moving averages conflict, while 21-day Bollinger bands contract, which is a neutral setup.

Tuesday's bullish outside day and close above the current 1.3228 21-DMA was a positive signal.
The rejection of the lower Bollinger band in March followed by the close above the 21-DMA targets a test of the falling upper Bollinger band currently at 1.3519.
This would be the opposite of similar signals on the downside in January and February.

For more click on FXBUZ

gbp Mar 23 Click here

Treasury vs gilt yield spread Click here

Refinitiv IFR Research/Market Commentary


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