Talking Points:

- This week’s economic calendar[1] has a heavy USD[2] and GBP[3] focus, with rate decisions out of each representative Central Bank to go along with a release of UK inflation numbers from the month of February. Ahead of those items, GBP/USD[4] is putting in a bullish breakout on news of an agreement between the EU and UK on a Brexit transition deal.

- Wednesday brings new Fed Chair Jerome Powell’s first rate decision atop the bank, and markets are currently holding a 94.4% chance of a hike at that meeting. The bigger question is the rest of the year, as current probabilities are pointing to a 33.9% chance of four hikes (100 bps) from the Fed this year, and a 74.2% chance of three hikes (75 bps).

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If you’re looking for short-term indicators on GBP/USD[7], check out our IG Client Sentiment Indicator[8].

British Pound Poses Bullish Breakout At Start of Big Week

This should be an important week for the British Pound[9]. Tomorrow morning brings inflation numbers for the month of February and then on Thursday we get the Bank of England for a rate decision. With this being a non-Super Thursday rate announcement, expectations are very low for any actual moves. More pressing will be the bank’s tolerance for a rate hikes later in the year after the hawkish twist that was seen in February[10]. The driver for that hawkish shift at the Bank of England has been inflation[11], and this continues above the 3% figure that’s more than 50% away from the BoE’s own target of 2%; and it’s been that way for five consecutive months now.

UK Inflation Remains Elevated Above the BoE’s Target; February Inflation Due on Tuesday

UK CPI Monthly Since February, 2017

Chart prepared by James Stanley[12]

The British Pound is catching a bid[13] ahead of tomorrow’s inflation release, with GBP/USD being driven by some optimistic news on the Brexit-front. News of an agreement on a Brexit transition deal have helped to prod-prices higher in GBP/USD. Prices had previously posed a bullish breakout from a bearish trend-line last week, helping to further build-in to a shorter-term bullish channel in the process. Price action[14] caught a bit of support on the projection of that bearish trend-line on Friday, and have since rallied above channel resistance.

GBP/USD Four-Hour Chart: From One Trend-Line to Another, Bullish Channel Building

gbpusd four hour chart

Chart prepared by James Stanley[15]

This helps to put the longer-term

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