- US prices paid by consumers and producers continue to rise, further cementing the need for a 50bp hike by the Federal Reserve.
- UK inflation rate at its highest point in 30 years, reaches 7%.
- GBP/USD Price Forecast: Double Bottom Near Yearly Lows Looms as Pound Climbs Towards 1.3100.
The British pound rises and recovers substantial ground in the American session, amid an upbeat mood in the market, despite the continued fight between Ukraine and Russia and a busy week for the US economic calendar weighed down by inflationary measures that affect the dollar. At the time of writing this article, the pair GBP/USD it trades at 1.3098.
The US agenda on Tuesday witnessed the Consumer Price Index (CPI), which exceeded the 8.5% threshold for the first time since 1981, while inflation without food and energy, the so-called core CPI, rose 6.5%, due to below the estimated 6.7%. The figures show that inflation is stubbornly high, but the core CPI showed that prices actually moderated compared to forecasts. That sparked a reaction in money market futures derivatives as traders eased the Fed’s aggressive tightening of 220 basis points to 200 by the end of the year.
Meanwhile, on Wednesday, March producer prices paid (PPI) rose 11.4% year-on-year, the most since 2010, above all estimates and emphasizing that inflation is tighter than expected as producers they are about to pass costs on to customers. Excluding volatile items like food and energy, the so-called core PPI rose 9.2% year-on-year, higher than the 8.8% forecast, in contrast to the latest core CPI report, which showed inflation could be close to peaking.
Sources quoted by Bloomberg said that “[D] despite the sigh of relief from yesterday’s core CPI reading, this is worrying”, adding that “50 bps is starting to feel common”.
On the other hand, the economic agenda of the United Kingdom also presented inflation figures, led by the March Inflation Rate, which expanded by 7%, in line with expectations but higher than the 6.2% of March, the highest in 30 years.
Money market futures have priced in a 25 bps rate hike at the Bank of England meeting on May 5. However, it’s worth noting that Lieutenant Governor Jon Cunliffe voted for no change at his last meeting, a move widely unexpected by investors, which weighed on sterling’s outlook and pushed the pound down to its yearly low to date. date around 1.2979.
GBP/USD Price Forecast: Technical Outlook
The GBP/USD pair appears to have formed a double bottom on the daily chart, but as long as the daily moving averages (DMAs) remain above the exchange rate, the pair is biased lower. However, it is worth noting what was mentioned above.
If GBP/USD bulls push prices above Mar 23 at 1.3298, then the double bottom could be confirmed and target 1.3600.
The first resistance of the GBP/USD would be 1.3100. A break of the latter would expose the now low resistance of the 1.3160 December 2021 pivot, followed by 1.3200. Once broken, that would open the door to 1.3298, the 23rd March cycle high.
Technical levels
Source: Fx Street
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