⚡Crypto Alert : Altcoins are up 28% in just last month! Unlock gains and start trading now - Click Here

GBP/USD reversing lower after the softer CPI numbers

GBP/USD Deciding at the 50 Daily SMA After the UK CPI Report

Posted Wednesday, February 15, 2023 by
Skerdian Meta • 2 min read

GBP/USD traded with clear positivity to start attacking 1.2270 level after it climbed nearly 200 pips in the first two days, as the sentiment turned mildly positive in financial markets. This pair formed a double top at 1.2450s and reversed lower early this month, but the decline stopped and we have seen a steady but cautious bullish move since then.

But the 20 SMA (gray) stopped the climb yesterday and the daily candlestick closed as an upside-down pin, which might point to a bearish reversal, given the slow pace of the bullish move. Yesterday the earnings report from the UK came in lower than expected for January, but the unemployment claims numbers showed a decline, instead of an increase that was expected, which lifted the Pound.

The UK inflation report was released earlier this morning, showing bigger-than-expected slowdown in January for the year-on-year number, as shown below;

UK January Inflation Report

CPI
  • January CPI YoY +10.1% vs +10.3% expected
  • December CPI was +10.5%
  • CPI MoM for January -0.6% vs -0.4% expected
  • Prior CPI MoM +0.4%
  • Core CPI YoY +5.8% vs +6.2% expected
  • Prior core CPI YoY was +6.3%
  • Core CPI MoM -0.9% vs -0.5% expected
  • Prior core CPI MoM was +0.5%

The headline reading is still in double-digits but it reflects a notable drop from the 10.5% reading in December at least. This has seen the pound fall in a kneejerk reaction, with cable down from 1.2135 to 1.2110 currently.

Looking at the details, the easing in annual inflation in January mainly reflected price changes in the transport division, particularly for passenger transport and motor fuels. There were also downward effects from restaurants and hotels, with the largest, partially offsetting, upward effect coming from alcoholic beverages and tobacco.

 

But GBP/USD could drop back below 1.21 following the US retail sales report which will be released in a while, since traders are waiting for these numbers to hint at how the US consumer is feeling.  So overall, both the buyers and sellers are currently looking neutral, although caution is warranted in the near-term as we prepare for the release of the US data.

If retail sales numbers show another decline in January, this pair could climb above the six-month peak of 1.2450 which will confirm the bullish momentum. If sales are stronger than expected, then we’re likely to see sellers will come quickly and the price will slip below 1.20 pretty fast.

GBP/USD Live Chart

GBP/USD
Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Related Articles
Comments
3 1 vote
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments