For the Bank of England's Mark Carney today was not his day as inflation once again lifted to 0.3% m/m and 3.1% y/y (3.0% exp), which in turn meant that being above the 2% inflation target he was obliged to write a letter to the Chancellor of the Exchequer to explain why it's so high. In the modern age with all in the information that seems somewhat silly, but the reality is that Brexit has put pressure on prices just before Christmas and while normally a high interest rate in recent times has been attractive to trades, in this case it was certainly not. One thing that is not clear is if inflation will continue to keep pressure on the UK economy, as most of it was prescribed to falls in the exchange rate in recent times. However, since the exchange rate has recovered and has moved to be more stable. I believe that inflation will likely taper off, unless we see some disastrous Brexit news in the short term. It's also likely that if inflation does persist, an interest rate hike will certainly be on the cards in the near future.

For the GBPUSD it has been a simple slide back lower and this marks the third straight day of losses after so much enthusiasm for the Brexit deal - which David has seemingly commented on not being law causing feathers to ruffle in Brussels. If we are to see further falls then my eyes would be on the key support levels at 1.3256 and 1.3220 which will be a key area; namely because of the 200 day moving average charging up the charts but also the bullish trend line which is also in place. This key level would build a strong case for the bulls to fight back if there were many left in the market. In the event that we do tick back upwards off some positive news and renewed optimism in the pound, then 1.3393 and 1.3438 are going to be the first major levels of interest to trades on the rise.

Some other positive news has been the Tax bill, with murmurings out of the Senate that revisions have been made and could in theory rush through and get on the president's desk by Christmas. This would be a big surprise if it turned up in the coming week, as expectations are that it would take some time. One clear winner of all of this though has been the S&P500 which continues to climb up the charts and is making new ground.

So far resistance levels are looking like the usual candidates, with psychological levels at 2675 and 2700 likely to be the pausing points at present. Support can also be found around 2652 and 2631, but the bears are very scarce when it comes to pressure on the S&P500 at present - especially with the tax bill in tow. It's easy to say that equity markets could be overvalued, but at the present time the markets seem keen to keep on pushing. 

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