Resistance in the GBPAUD last week could spell a correction for the British pound.
GBPAUD – Daily Chart
GBPAUD found resistance above 1.94 last week and then dropped back sharply. With the price at previous levels, a push to 1.92 is possible.
On Friday, Franklin Templeton’s head of European bonds said that the US will have to cut rates sooner than many think.
“We have been more constructive on the UK, we think they probably do need to cut rates sooner than the others,” he said.
“The UK economy has continued to disappoint, inflation is coming down quickly, and the economy is more responsive to rate hikes and rate cuts than Europe or the US,” he added.
“Therefore, the central bank should be able to cut rates fairly soon, I wouldn’t be shocked if they cut in the next 2-3 months.”
Employment for the UK economy was released on Tuesday, with the market expecting a reading of 108k. The unemployment rate is expected to hit 4% after last month’s 3.9%. Rising unemployment can hurt the UK currency.
Core inflation numbers are due on Wednesday and are expected to come in at 5.2%, a slight rise from last month’s 5.1%. The annual inflation rate is expected to rise 0.2% to 4.2%. These numbers will be critical for the BoE’s interest rate assessment. Further data comes on Thursday with Australian employment in the Asian session, where an improvement is expected from last month’s negative number.
Finally, the UK growth figures will provide further big data later that day. The economy is expected to increase slightly from -0.2% to -0.1% over three months.
This means that weakness in the UK data could lead to a high and a correction for GBP/AUD.
