Yesterday's rally was driven solely by the resumption of talks on the trade deal between London and Brussels. Although negotiations have not started, at least they will continue to proceed. It all started with the fact that the European Union, at least in words, guaranteed the preservation of the economic sovereignty of Great Britain. London noted that this is a clear positive shift in the position of Brussels, making it possible to negotiate as equals. As a result, the United Kingdom announced that the negotiation process will proceed. And apparently, talks will begin next week. And the pound's growth is due to both the resumption of talks and the apparent change in the EU's approach, which seems to be a clear concession to London.
At the same time, the pound simply ignored the inflation data, although the growth rate of consumer prices accelerated from 0.2% to 0.5%. Which turned out to be slightly better than the forecast of 0.4%. So, unlike the euro area, where deflation has been going on for the second month, inflation in the UK is growing, which is good news. Another thing is that the situation with Brexit is much more important now. So the pound started to grow a little later on.
In terms of Brexit, most likely, we can expect complete silence until next week. Information on it will start to flow when talks resume. So the market may still switch to macroeconomic reports, although we do not have much of those this week as well. The only thing worth paying attention to today is the data on claims for unemployment benefits in the United States. And it is quite possible that these data will become a reason for a slight correction, because the pound is clearly overbought. Although the number of initial applications for unemployment benefits should increase from 898,000 to 915,000, the number of repeated applications may decrease from 10,018,000 to 9,750,000. And its decrease below 10,000,000 may well have a serious psychological impact. Investors can regard this as a clear demonstration of the confident recovery of the labor market, which will pull the entire economy with it.
Repetitive Unemployment Insurance Claims (United States):
The GBPUSD currency pair showed high activity on Wednesday, as a result of which an inertial movement emerged, which led to a breakdown of the local high on October 12 at 1.3081. Speculative excitement is exactly what we have now and on the basis of which an upward move of more than 200 points was made. The 1.3175 coordinate is assigned as the new local high.
Based on the quote's current position, you can see a slight pullback, which looks more like stagnation. The overbought pound is visible to the naked eye, and if speculators do not grab any info-noise, a technical correction will occur in the market.
As for volatility, yesterday's momentum speaks for itself, setting the highest speculative trading ratio in the market.
Considering the trading chart in general terms, the daily period, we can see the recovery process relative to the first half of the last month.
We can assume that in case the price does not settle higher than 1.3175, a correctional move in the direction of 1.3080 will occur.
From the point of view of a comprehensive indicator analysis, we see that the indicators of technical instruments on the minute, hourly and daily intervals signal a buy due to the inertial upward movement.