GBP/USD Holds After Softer UK Inflation CPI for July

GBP/USD has shown a lot of volatility recently, with a 4-cent surge and a reversal in July, while gaining 2 cents in less than a week, as risk sentiment improves. there has also been some important economic data from the UK this week which has been helping in the volatility, yesterday with the UK Employment report and Unemployment Rate, while this morning we had the US CPI consumer inflation.

Despite ongoing concerns about the accuracy of the data, yesterday’s UK jobs report played a key role in boosting GBP/USD. The report highlighted a significant drop in the unemployment rate, although the rise in jobless claims and a roughly 1% decrease in earnings cast some doubt on the overall picture.

UK Daily Chart – The Lows Getting Higher as MAs Turn into Support

Nevertheless, the market focused on the improved unemployment rate, combined with a boost in risk appetite, which helped lift GBP/USD , with the pair closing near the 1.2870 level. This represents a decline of over 4 cents from its peak in the latter half of July, indicating that the earlier bullish breakout was short-lived. The recent bearish reversal in the pair was driven in part by the Bank of England’s recent rate cut, which came in response to growing signs of economic weakness in the UK. On the daily chart, moving averages offered support for GBP/USD, though the BOE did not signal any immediate plans for further rate cuts.

UK July CPI Inflation Report:

• UK July CPI: +2.2% y/y (vs. +2.3% expected), up from June’s +2.0%.
• Core CPI: +3.3% y/y (vs. +3.4% expected), down from prior +3.5%.
• Core annual inflation continues to decline, with core prices easing further.
• Headline CPI is slightly below estimates but shows a modest increase from June.
• The ongoing decline in core inflation could support the case for the Bank of England to consider rate cuts in the coming months.
• Prior to the report, the odds of a September rate cut were around 36%, with potential shifts expected as the market opens.

GBP/USD Live Chart

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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