- GBP/USD hit a weekly high of 1.2818 but pared those gains, slumping below 1.2700 afterwards.
- The US CPI stood above 3%, while the core CPI remains stable around 4% highs.
- Market participants’ attention shifts to the release of UK GDP figures for the second quarter.
With the release of inflation data in the United States (US), which beat the previous month’s reading but fell short of estimates, the GBP/USD pair reacted higher and hit a new weekly high of 1. 2818. However, as US Treasury yields soared, the US Dollar (USD) is staging a comeback as GBP/USD is trading at 1.2687, down 0.24%.
Pair hits weekly highs but trims gains ahead of key UK data release
The US Bureau of Labor Statistics (BLS) revealed that prices during the month of July in the US rose above the 3% year-on-year of the previous month, but below estimates of 3.3%, which it is considered a sign that prices are cooling off. The Consumer Price Index (CPI) rose 3.2%. The same report showed that the core CPI fell to 4.7% yoy, below the 4.8% in June and the estimates, highlighting its stickiness.
Although the data is encouraging, the Federal Reserve (Fed) would remain data dependent as San Francisco Fed President Mary Daly commented that it is too early to declare victory, stressing that it remains data dependent, and backed the 25 basis point rate hike in July. Asked about the easing of monetary conditions, she added that it was “a long way from a conversation about rate cuts.”
Other data showed that the labor market gave another sign of easing, although this should be viewed with caution as the latest figures have not been consistent. Initial jobless claims for the week ending July 29 topped forecasts of 230,000 and advanced 248,000.
Following the data, traders cut bets that the Fed would raise rates again, as money market futures show. CME’s FedWatch tools put the odds for a September rate hike below 10%, while for the November meeting they fell to 23.6% from 33.8% a month ago.
Against this background, GBP/USD rallied strongly. Still, market participants discouraged the move as UK data is expected to show the country breaking out of recessionary territory as Gross Domestic Product (GDP) for the latest quarter is due to be released. If the UK releases strong numbers, GBP/USD could gain traction and retest 1.2800. Otherwise, GBP/USD would resume its downtrend and extend its losses beyond the 100 day EMA, with traders keeping an eye on the 200 day EMA.
GBP/USD Price Analysis: Technical Perspective
The failure of GBP/USD to hold gains above 1.2800 offered sellers a better entry price. Furthermore, GBP/USD made a new weekly low, opening the door for a test of the daily low of August 3 at 1.2620. A break of this latter level would expose the 100 day EMA at 1.2605, followed by the psychological figure of 1.2600. On the other hand, GBP/USD could retest 1.2800 if buyers recover 1.2700.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
