FXB downside after U.K. inflation
As a young trader (21 years old), I see my trading style as more of an art than a science. I don't understand patterns, and I don't use technical analysis. I am a macro trader. I take information from various sources (WSJ, Twitter, Investing.com, Trading Economics, ect.), and my instincts kick in. I understand where assets should be moving on data releases.
The U.K. pound has been on a monster rally in the past month and change. Expectations for the U.S. Federal Reserve to pause rates, with some saying cuts later into the year, has simmered the red hot U.S. dollar. The Bank of England on the other hand, is expected to continue hiking rates in the midst of the highest inflation in recent memory. When yields rise on the U.K. Gilt, that makes their debt more attractive to foreign investors, making their currency appreciate against the greenback.
This past Wednesday morning, at 1:00AM (CST), U.K. inflation came in hotter than consensus estimates (8.7% actual versus 8.2% consensus), as did core inflation (6.8% actual versus 6.2% consensus). I would have expected the pound to appreciate against other currencies as their currency becomes more valuable as Gilt yields rise. The opposite happened, FXB has now fallen two consecutive days. I was building up my short position against the pound, but we must remember U.S. data sets can affect currencies across the globe. I exited my FXB position before the open today with the intention of hopping back in after said release.
Tomorrow (5/26), before the bell, we have U.K. retail sales MoM, U.S. durable goods orders MoM, core PCE prices MoM, personal spending MoM, and personal income MoM. There's no telling where any of this data will land us, especially the U.S. data, and that is why I closed out of my position today.
As far as I can see, we have no upcoming U.K data that would affect the pound. That is why I'm confident in this trade. The market will have time to digest what has transpired, and my hope is that it will come to the same conclusion that I have.
I have full intentions of getting back into my trade after this data is priced back into the stock. The most important lesson I've learned in my very young trading career is protecting your capital and letting the trades come to you, don't look for them, they will find you ;)
fyi - this is my first writing and any feedback is appreciated! Thanks
The U.K. pound has been on a monster rally in the past month and change. Expectations for the U.S. Federal Reserve to pause rates, with some saying cuts later into the year, has simmered the red hot U.S. dollar. The Bank of England on the other hand, is expected to continue hiking rates in the midst of the highest inflation in recent memory. When yields rise on the U.K. Gilt, that makes their debt more attractive to foreign investors, making their currency appreciate against the greenback.
This past Wednesday morning, at 1:00AM (CST), U.K. inflation came in hotter than consensus estimates (8.7% actual versus 8.2% consensus), as did core inflation (6.8% actual versus 6.2% consensus). I would have expected the pound to appreciate against other currencies as their currency becomes more valuable as Gilt yields rise. The opposite happened, FXB has now fallen two consecutive days. I was building up my short position against the pound, but we must remember U.S. data sets can affect currencies across the globe. I exited my FXB position before the open today with the intention of hopping back in after said release.
Tomorrow (5/26), before the bell, we have U.K. retail sales MoM, U.S. durable goods orders MoM, core PCE prices MoM, personal spending MoM, and personal income MoM. There's no telling where any of this data will land us, especially the U.S. data, and that is why I closed out of my position today.
As far as I can see, we have no upcoming U.K data that would affect the pound. That is why I'm confident in this trade. The market will have time to digest what has transpired, and my hope is that it will come to the same conclusion that I have.
I have full intentions of getting back into my trade after this data is priced back into the stock. The most important lesson I've learned in my very young trading career is protecting your capital and letting the trades come to you, don't look for them, they will find you ;)
fyi - this is my first writing and any feedback is appreciated! Thanks
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