GBP/USD Steady at $1.3425, Can UK Inflation Figures Trigger Price Action?
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- Annual CPI is expected to reach 3.9 percent, significantly over the BoE’s top ceiling of 3 percent.
- Great Britain’s officials said that the UK’s coronavirus booster vaccine rollout was extended to people aged 40 and 49.
- GBP/USD pair has completed a 38.2% Fibonacci retracement at the 1.3452 level.
The GBP/USD bears returned during Wednesday’s Asian session after hitting a one-week high the day before. Nonetheless, the GBP/USD pair is still under pressure at approximately 1.3420 at the time of publication. On Wednesday, investors’ primary focus will stay on the UK inflation figures, which are expected to rise from 3.1% to 3.9%.
The most recent UK employment figures reinforced bullish expectations for the Bank of England’s (BOE) forthcoming moves. The day before, the GBP/USD pair closed at $1.3418 after setting a high of $1.3450 and a low of $1.3403. GBP/USD remained flat throughout the day, with a minor loss amid the strength of the US dollar.
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UK Inflation – What to look out for?
The British pound has had a rough couple of weeks. Investors were left scratching their heads when the Bank of England defied market sentiment for a rate hike at its November meeting by keeping rates on hold and slamming the pound. But, just as the pound was regaining its footing, another hit from the US inflation jolt arrived.
However, with a jam-packed release schedule this week, sterling will have many chances to recoup some lost ground. On Wednesday, the focus will stay on the UK CPI figures from the Office for National Statistics. If CPI rises more than expected, it could fuel predictions that the Bank of England will raise interest rates at one of its forthcoming sessions. Annual CPI is expected to reach 3.9 percent, significantly over the BoE’s top ceiling of 3 percent.
A stronger dollar weighs on the GBP/USD
The currency pair GBP/USD fell after the US dollar strengthened against a basket of six major currencies. The US Treasury Yield on the benchmark 10-year note reached 1.63%, while the DXY reached 95.60. The higher yields came in after the economic data from the US Labor Department suggested that more and more US citizens were quitting their jobs.
This report increased the demand for interest-bearing treasury notes, which ultimately added strength to the US dollar and had a negative impact on GBP/USD. On the data front, at 05:01 GMT, the Rightmove HPI declined to -0.6% in November against the previous 1.8%. From the US side, the Empire State Manufacturing Index rose to 30.9, against the projected 22.1, and supported the US dollar, adding to the further loss in GBP/USD.
GBP/USD slips aimed at more robust US retail sales
The holiday shopping season in the United States has gotten off to a rousing start. Retail sales are expected to expand well in the fourth quarter, ahead of the beginning of the holiday shopping season. That includes next week’s US Thanksgiving, followed by Black Friday and Cyber Monday sales.
As per the Census Bureau, last month’s sales increased by 1.7 percent month on month, meeting Scotia’s prediction. Despite the fact that a 1.8 percent m/m increase in cars and parts should have resulted in a larger headline gain than ex-autos, ex-auto sales increased by the same 1.7 percent m/m. However, the more robust US sales have added selling pressure to the GBP/USD pair.
Covid-19 concerns: UK’s coronavirus booster vaccine
Great Britain’s officials said that the UK’s coronavirus booster vaccine rollout was extended to people aged 40 and 49. That’s in a bid to boost waning immunity in the population ahead of the colder winter months. According to the Joint Committee on Vaccination and Immunisation, clinically vulnerable and frontline health workers will experience the benefit of the rollout.
UK Health Secretary Sajid Javid said that he had accepted the recommendation and would ask the health service to prepare to offer the vaccine to those newly eligible as soon as possible. According to government data, Britain reported 36,517 cases of coronavirus and 63 deaths within 28 days of a positive test on Sunday.
Britain might trigger Article 16
The risk that Britain might trigger Article 16 and suspend parts of the Northern Ireland Protocol should act as a headwind for the British pound. However, some of the risks were mitigated following the talks between Britain and EU officials regarding Brexit jitters. Britain’s risk of triggering Article 16 weighed on GBP and dragged GBP/USD further to the downside.
GBP/USD price forecast – Daily technical levels
Support Resistance
1.3398 1.3445
1.3376 1.3472
1.3350 1.3493
Pivot Point: 1.3424
GBP/USD Standstill at $1.3430 – Brace for UK Inflation figures
The GBP/USD pair exhibits a neutral bias while trading at the 1.3432 level on the technical front. Overall, the pair is in a consolidation phase, maintaining a narrow trading range of 1.3450 – 1.3400.
In the 4-hour timeframe, the GBP/USD pair has completed a 38.2% Fibonacci retracement at the 1.3452 level. The closing of a candle below this level suggests the odds of a bearish reversal in the GBP/USD. The downward trendline also extends significant resistance at the 1.3452 level in the same timeframe, supporting the potential selling trend.
On the bearish side, the GBP/USD’s immediate support is at the 1.3400 level. Whereas the breakout of 1.3400 can drive the selling trend until the 1.3358 level. Furthermore, the RSI and MACD remain in a sell zone, respectively below 50 and 0. However, the 20 and 50 EMA are signaling indecision among investors. Perhaps, traders are waiting for the UK inflation rate to determine further trends in the GBP/USD.
Consider taking a sell position below 1.3400, with immediate targets at 1.3358 and 1.3283. Alternatively, the breakout of the 1.3455 level can help us secure a quick buy trade until 1.3508. Good luck, and stay tuned for more updates!
