HomeForex MarketInflation in Focus Once more as Weak Pound Continues to Harm UK...

Inflation in Focus Once more as Weak Pound Continues to Harm UK Shoppers

POUND STERLING TALKING POINTS

  • Highlight on UK CPI!
  • BoE could transfer to a 50bps hike in August.
  • Cable stays beneath strain regardless of short-term reduction rally.

GBP/USD FUNDAMENTAL BACKDROP

Subsequent week’s financial calendar is rife with excessive affect occasions from each the UK and U.S. (see financial calendar beneath) with UK inflation being the principle focus for the pound. Each core and headline inflation figures have but to take a step again since September final yr with expectations taking a look at one other improve. This could improve hawkish strain on the Financial institution of England (BoE) to extend rates of interest by 50bps in August – which they’ve put ahead as an choice in throughout their final fee announcement.

Cash markets have been pricing this in for a while now however the central financial institution might want to consider rising unemployment (albeit marginal) and a slowing UK financial system. Inflation is unlikely to abate from financial coverage as we’re properly conscious of the availability points stemming from the Russia/Ukraine battle.

GBP/USD ECONOMIC CALENDAR

Supply: DailyFX Financial Calendar

TECHNICAL ANALYSIS

GBP/USD DAILY CHART

gbpusd daily chart

Chart ready by Warren Venketas, IG

Each day GBP/USD worth motion reveals the restoration post-FOMC and BoE however has since given again some positive aspects on Friday. Bulls are discovering resistance on the 20-day EMA stage (purple) and as we head into Wednesdays CPI learn I don’t see a lot in the best way of great worth strikes for cable. I count on costs to hover between the 1.2200 and 1.2400 ranges respectively with my medium/long-term outlook in favor of the U.S. greenback. Whereas there’s nonetheless room for upside within the short-term, a key level of inflection can be round trendline resistance (black) and whether or not or not we see a candle shut above (breakout) which may then immediate a mindset change to a possible development reversal.

Key resistance ranges:

  • Trendline resistance (black)
  • 1.2494
  • 1.2400
  • 20-day EMA (purple)

Key help ranges:

CAUTIOUS IG CLIENT SENTIMENT

IG Shopper Sentiment Knowledge (IGCS) reveals retail merchants are at the moment LONG on GBP/USD, with 71% of merchants at the moment holding lengthy positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment nevertheless, as a consequence of current modifications in lengthy and quick positioning we arrive at a short-term blended bias.

Contact and observe Warren on Twitter: @WVenketas

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