MacroSpace

FUNDAMENTAL PREDISPOSITION SCENARIO

Short
OANDA:GBPUSD   British Pound / U.S. Dollar
OANDA:GBPUSD In these times the economies from an endogenous standpoint are facing uncertain futures . The UK economy has been highly impacted by the pandemic as have others, yet the UK have successfully rolled out and produced numerous vaccinations and are distributing it to other economies all over. This is boosting the UK output and manufacturing & international trade after seeing these sectors fall to unprecedented levels. UK manufacturing is back up to pre-pandemic levels yet is giving us extreme inflation outlook for the future while the services sector is still deteriorating as restriction's from the government continue to halt this sector from functioning as normal, Meaning financial help is inevitable to keep as many struggling businesses as possible alive. Consumer sentiment outlook has risen as confidence re-grows after the the vaccination programme is well underway. The construction / housing sector has also risen to previous high level readings, As construction & housing permits are being approved to keep the money flow and sector alive through the whole pandemic. Printing of M2 money supply is still maintained at a level of nearly 2.7 million a week 18% annualised rate this slightly lower than in march 2020 when we seen an annualised rate of 65%. Interest Rates maintain a low 0f 0.1% as deflationary measures, But we can now start to see inflation starting in the CPI & PPI prices. Unemployment stably high over the 5.0 mark. Government 10Y rates slowly starting to rise as inflation slowly is taking place and offering steadily higher rates of return as they try to reduce the debt bill on the deficit spending due to high spending on domestic goods to boost economic output & injections to help sectors. Looking at this information on a relative basis to the U.S economy, numbers are slightly similar yet U.S numbers are larger due to a obviously larger economy but inflationary measures have kicked in quicker in the U.S and inflationary scores are higher than those in the UK. Relative GDP is showing that the U.S is still growing at a faster rate than the UK.

With the uncertainty of the pandemic & current market prices still overlooking all ideas, I will be waiting to make a move on this pair when the time is right. My fundamental predisposition on the G/U pair is SHORT. COT reports backing this in favour as the data for this has flipped into negative for the start of this year, But the current market is in a rally & on the long term technical side, has closed and consistently traded well above a long term level of support at around the 1.34 level. If the market continues to rally on the hopes of a vaccine driven outlook, I will look to short this pair at around the 1.42 level giving that the economic data has no dramatic change or may even look to take a position back below the 1.33 level if price already takes a turn and trades comfortably.

Comments