GBP/USD Under Pressure Amid Robust US Economic Indicators and Anticipation of UK CPI Data
During the Asian session on Wednesday, GBP/USD registered a downward trajectory for the second consecutive day, with current values hovering around the 1.2160 mark. This is partly attributed to the buoyant economic data emanating from the United States, which placed downward pressure on the currency pair.
Recent data from the US Bureau of Economic Analysis (BEA) has showcased a positive trend, with Retail Sales in September exceeding the market projection of 0.3% MoM, attaining 0.7%. Additionally, the Retail Sales Control Group marked a 0.6% uptick, a significant leap from its prior increment of 0.2%. Such metrics underscore the enduring strength and confidence of US consumers.
Furthermore, reports from the Federal Reserve have depicted a 0.3% increase in Industrial Production, a performance that contrasts the earlier zero-growth forecast. Concurrently, the US Dollar Index (DXY) seeks to recuperate from its recent downturn, trading ascendant at approximately 106.28 during the time of reporting. US Treasury yields, especially the 10-year bond, are on an uptrend, currently pegged at 4.83%.
Thomas Barkin, the Richmond Fed President, emphasized that the prevailing policy orientation appears restrictive. Barkin voiced his reservations about the forthcoming FOMC policy meeting scheduled in November. He posited that sole dependence on elongated higher bond yields isn’t a sustainable strategy to introduce monetary constraints.
Recent expressions of caution by several Federal Reserve officials underscore the central bank’s circumspect approach. There’s an evident reluctance to modify monetary policy stringently in the current economic climate.
Meanwhile, the UK’s subdued earnings figures might be pressuring the British Pound, subsequently impacting the GBP/USD pair. Average Earnings Excluding Bonus for the quarter ending in August remained consistent at 7.8%, meeting expectations. However, the quarterly Pay levels Including Bonus dipped to 8.1%, falling short of the anticipated 8.3%.
Market stakeholders are intently awaiting the release of the UK’s Consumer Price Index (CPI) on Wednesday. Forecasts suggest a potential contraction in the yearly figures, with a shift from 6.7% to an anticipated 6.5%. The Core CPI for the month is also projected to decrease slightly from the previous 6.2% to 6%. However, despite this forecasted annual moderation, there’s a general consensus predicting a substantive rise in the monthly CPI, from 0.3% to 0.4%.
A surge in monthly inflation data might spark discussions around a potential interest rate increment by the Bank of England (BoE). Current market speculations posit a 50% likelihood of a 25 basis points elevation in the ongoing cycle.
GBP/USD Technical Analysis
The GBP/USD currency pair recently touched its crucial support level of 1.2130, following which a bullish rebound was observed, keeping the optimistic trend forecast intact for the forthcoming duration, eyeing 1.2297 as the subsequent primary objective. To facilitate achieving this target, the currency pair must breach the resistance presented by the EMA50 at 1.2200.
It’s pivotal to note that a breach below 1.2135 might hinder the anticipated bullish movement, redirecting the pair towards an initial test at 1.2037. For the day, the projected trading bandwidth lies between the 1.2100 support level and the 1.2270 resistance marker.
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