AUKUS, and Sterling! 

US joint deal with UK and Australia, called AUKUS

Market analyst – IFC Markets

Overnight, President Joe Biden announced a new circuit including the US, UK, and Australia to work on advanced technologies, mostly based on military, including the acquisition of nuclear-powered submarines, in response to China gaining power. 

This Union of three countries (At least now it is three, but can include more countries, probably New Zealand and Canada in near future) known by the acronym AUKUS, are supposed to cooperate on key technological areas like artificial intelligence, cyber, quantum, underwater systems, and long-range strike capabilities. It was announced on a virtual press by US president Joe Biden, British Prime Minister Boris Johnson, and Australian Prime Minister Scott Morrison on Wednesday afternoon. 

On the data front, yesterday we had British Inflation numbers, which in all published areas, CPI, PPI, RPI, and both headline and Core, we saw that inflation growth much more than forecasts. This increasing inflation is supposed to put more pressure on BoE to connive some of its Dovish policies, which is supportive of the British pound. On the other hand, US inflation numbers were somehow ignored by market participants, as they believe with well grow signs in the Us economy and improving the labor market, anyhow we will see the tapering to start soon, especially with knowing that Republicans still are not agreed with democrats request to increase the Government debt ceiling, which is pausing issuing new Bonds. 

GBPUSD faced some difficulties which are holding it back to find a specific direction. Both currencies have some reasons to hold the bulls and attract the bears, which is caused pairing to trade mostly between 1.1800 and 1.1850 area in September, the areas which it was struggling to exit, back in July also. 

While the latest mostly political announcement (AUKUS) can be supportive for the Pound, at the same time it is supporting the US dollar as well. For the next days, Cable traders must focus on the market sentiment and caution ahead of other important data to determine the Fed’s next move on its monetary policies, which directly affect the Cable movement. 

From the technical side also we can see the indicators remain natural and waiting for more updates to determine the direction. Key support and resistance at the moment, sitting on 1.1800 and 1.1850. 


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