GBPEUR had another attempt at the 2023/2024 highs yesterday afternoon but once again failed to breach this key level. GBPUSD had similar moves higher, carving out a fresh 2-month high before easing off going into the close of European trading. On the data front, the latest ECB survey saw 3-year CPI expectations be revised lower to 2.4% suggesting over the longer term, inflation is expected to ease more than previously expected.
*Daily move - against G10 rates at 7:30am, 29.05.24
** Indicative rates - interbank rates at 7:30am, 29.05.24
A quiet day ahead with an empty economic calendar. The client base enjoyed the GBPEUR rally to the 23/24 highs, hedging against the prospect that the recent gains for GBP could be overdone. We saw similar sentiment amongst our GBPUSD clients, however there are some out there placing limit orders near the highs of 2024 ahead of the core PCE inflation numbers on Friday, looking to take advantage of continued USD weakness going into month end.
USD is slightly stronger this morning following a rise in treasury yields overnight.
GBP has had an impressive run since the 22nd of April, with the Bloomberg GBP Index showing gains of 2.77% since. However, these gains are looking stretched now, if technical analysis is anything to go by. The chart below includes a technical analysis indicator, known as the RSI which measures the speed and magnitude of an asset's price changes to signal overbought (above 70)/oversold (below 30) conditions. Applied to the GBP Index, the RSI is currently indicating that GBP is overvalued and could well be due a retracement if price action following the two previous times the reading was above 70 is anything to go by.
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