GBPUSD breaks through 1.2000 level, reaching 3-month highs, but falls back towards 1.1925

• Prices paid by US growers fell, a welcome sign for risk-seeking investors, and the dollar weakened.
• UK jobs data was mixed, although the pound was supported by general dollar weakness.
• Federal Reserve officials pledged to fight inflation, albeit by slowing the pace of interest rate hikes.

The GBP soars against the US dollar after the publication of the prices paid by producers in the United States, which show that inflation is subsiding. Additionally, an upbeat UK jobs report supported the pound, with GBP/USD gaining 1.50% for the day. At the time of writing, GBPUSD is trading at 1.1915.

US inflation cools as CPI and PPI decline in October

The sentiment is upbeat, sparked by two Federal Reserve (Fed) officials saying it would be appropriate to slow the pace of rate hikes following the release of a soft US Consumer Price Index report in October. . In addition, the Producer Price Index (PPI) for the same period expanded 8% at an annual rate, below the estimated 8.3%, according to a survey by the US Department of Labor (DoL). The core PPI, which excludes volatile items, rose 6.7% annually, below the 7.1% forecast. With US CPI and PPI readings starting to show signs that US inflation is starting to cool, the Federal Reserve has some reasons to slow the pace of tightening. Therefore, further weakness of the US dollar is expected.

Following the US PPI release, GBPUSD approached its daily high at 1.2028, posting a new three-month high, but retraced some of its gains as GBPUSD trails below the 1.2000 mark.

Lately, several officials of the Federal Reserve made statements. Lisa Cook, one of the most recent Fed governors, said inflation is too high and the central bank is focused on tackling inflation. At the same time, Philadelphia Fed President Patrick Harker said the removal of $2.5 trillion from the Fed’s balance sheet is an “assumption.” Harker added that he is not “overly concerned” about inflation expectations and that the Fed can pause while the central bank continues to fight inflation.

Meanwhile, the New York Fed Empire Manufacturing rose 4.5, shattering expectations for a 6 contraction.

In the UK, Chancellor of the Exchequer Jeremy Hunt gave some hints about the autumn budget, due to be published on Thursday. He asserted that more will be asked of those who have the most and that “inflation-busting wage premiums would only fuel inflation”, suggesting that the new Tory government will be fiscally responsible.

In terms of data, UK employment data showed the number of people with jobs in the UK was down 52,000, more than the 25,000 decline estimated by street economists. At the same time, the Unemployment Rate rose 3.6%, exceeding the 3.5% expected.

The UK economic calendar will include the Consumer Price Index (CPI), Producer Price Index (PPI) and Retail Sales for October. In the United States, retail sales, industrial production, production capacity utilization and some statements by members of the Fed will be published.

GBPUSD Key Technical Levels