GBP/USD erases majority of daily gains, sits comfortably above 1.25

After rebounding sharply and closing the day above 1.25 on Wednesday, the GBP/USD pair extended its gains and rose to a weekly high of 1.2570 today. H  |  11/07/2019 19:45
  • BoE's Carney says there is risk of economic disruption from no-deal Brexit.
  • Today's inflation report from the U.S. helps greenback recover its losses.
  • US Dollar Index looks to close the day above the 97 handle.

After rebounding sharply and closing the day above 1.25 on Wednesday, the GBP/USD pair extended its gains and rose to a weekly high of 1.2570 today. However, the pair lost its traction in the second half of the day and erase a large part of its daily upside and was last seen trading at 1.2523, where it was up 0.2% on the day.

Earlier today, in its semi-annual Financial Stability Report (FSR), the Bank of England (BOE) said the market volatility was rise significantly in the case of a no deal Brexit bur said that UK banks would be able to cope with the potential negative impact of a hard Brexit and trade conflict. 

After the statement, "Material risks of economic disruption remain from no-deal Brexit," Bank of England Governor Carney told reporters and added that the financial system was ready for Brexit whatever form it takes to help the British pound preserve its gains against the buck.

Later in the American trading hours, the data published by the U.S. Bureau of Labor Statistics reported that inflation, as measured by the core Consumer Price Index, rose to 2.1% on a yearly basis in July to allow the US Dollar Index to recover from the weekly low that it set at 96.80 today. As of writing, the DXY was posting small daily losses at 97.04.

Commenting on the CPI readings, “Today’s report is consistent with inflation climbing back toward the FOMC’s target in the coming months," said Wells Fargo analysts.

"But Fed officials are increasingly concerned about the generalized weakness in inflation that has persisted this expansion. Although it is starting to get back on track, Fed officials have grown impatient over the time it is taking inflation to return to target on a sustained basis.”

There won't be any macroeconomic data releases from the UK and the Producer Price Index data from the U.S. will be the last potential catalyst.

Technical levels to watch for

 

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