FX.co ★ GBP/USD. Trapped in a flat: pound did not become the beneficiary of the latest releases

The pound-dollar pair continues to trade in a fairly narrow price range, despite important macroeconomic reports that were published both in the UK and in the US. Traders of the GBP/USD pair do not dare to open large positions – any price spikes (both descending and ascending) are almost immediately stopped, meeting the resistance of bears or bulls. As a result, the pair cannot leave the 38th figure, despite the rather strong intraday volatility.

GBP/USD traders reacted very cautiously to the US inflation release. The pair impulsively jumped to the level of 1.3890, but did not dare to storm the 39th figure. In this price area, the bears became more active, which, in fact, extinguished the upward surge.

It is noteworthy that the data on UK GDP growth published today also did not impress traders – neither bulls nor bears of GBP/USD. This was probably because the success of the British economy was offset by weak manufacturing data.

Thus, according to published data, the volume of British GDP on a monthly basis increased by 1.0% in June, with growth forecast to reach 0.8% and after a weak growth to 0.6% in May. If we talk about the dynamics of the second quarter, the British economy grew by 4.8% on a quarterly basis and by 22.2% in annual terms. This result coincided with the forecast values. The services sector made the strongest contribution to the growth of the indicator – this sector of the economy showed the strongest growth. The structure of the release suggests that growth in this area, which forms the basis of the UK economy, in the second quarter of this year reached 5.7% in quarterly terms and 21% – in annual terms. The construction sector grew by 3.3% in quarterly terms and jumped immediately by 53% year-on-year.

But the volume of industrial growth did not please investors: on a monthly basis, the indicator collapsed into a negative area (-0.7%), while most analysts were confident that it would show positive dynamics, rising to the level of 0.3%. The volume of production in the manufacturing industry of Britain in June was also disappointing: it increased by 0.2% on a monthly basis, with a growth forecast of 0.4%.

In other words, today's figures are quite contradictory: the GDP growth rate was at the forecast level, while production activity was disappointing. Therefore, the bulls of GBP/USD could only rise to the local high of 1.3880 (the Tenkan-sen line on D1), after which they turned 180 degrees. The US dollar also contributed to the price reversal, which strengthened its positions throughout the market in the second half of the day.

The greenback is still in demand, despite some disappointment with yesterday's inflation release. US inflation showed the first signs of slowing down, but at the same time remained at a high level, thereby strengthening the hawkish expectations of investors. In addition, the latest US macroeconomic reports, as well as the comments of some representatives of the Federal Reserve, helped the greenback to recover: The US dollar index is approaching the 93rd figure again, reflecting increased demand from traders.

So, the Producer Price Index (PPI) was published during the US session, which is an early signal of changes in inflationary trends. Recently, it has been showing positive dynamics, and it entered the green zone in July - both in monthly and annual terms (1.0% m/m and 7.8% y/y). Excluding food and energy prices, this indicator also exceeded analysts' expectations (1.0% m/m and 6.2 y/y).

The fundamental picture of the day was supplemented by representatives of the Fed, who commented on the current situation. In particular, according to the head of the Federal Reserve Bank of San Francisco, Mary Daley, the US central bank can begin the process of gradual normalization of monetary policy by the end of this year, given the strength of the economic recovery. In her opinion, this process "is appropriate to start with a discussion of adjusting the level of accommodation, where the starting point will be a reduction in the volume of asset purchases within the framework of QE."

A similar position was voiced by the head of the Federal Reserve Bank of Kansas City, Esther George. She also said that it is time for the Fed to adjust the monetary policy settings. At the same time, she was optimistic about the prospects for economic growth: in her opinion, the growth rate of the US economy will decrease in the near future, but will still remain strong. The labor market is also expected to recover further, while inflation seems to have reached its peak values.

Let me remind you that other representatives of the Fed have also tightened their rhetoric earlier. For example, the head of the Federal Reserve Bank of Atlanta, Rafael Bostic, recently said that the Fed should start curtailing QE "between October and December." But the rate, in his opinion, can be increased at the end of next year. In turn, the head of the Federal Reserve Bank of Boston, Eric Rosengren, noted that the central bank should announce a reduction in the purchase of treasury and mortgage bonds by $120 billion in September. Fed Vice President Richard Clarida, who previously voiced rather dovish theses, also tightened his rhetoric.

Thus, the fundamental picture for the GBP/USD pair is in favor of the US currency. The US dollar has an important trump card that the pound cannot "boast". The hawkish intentions of many Fed officials keep the greenback afloat and show character throughout the market - including when paired with the British currency. Given this fact, it will be difficult for GBP/USD bulls to overcome the resistance level of 1.3900 (which corresponds to the lower border of the Kumo cloud at D1). Therefore, when the price approaches this target, one can consider short positions with the target of 1.3770 - this is the Kijun-sen line on the same timeframe.