The GBP turned bearish over the last few weeks after a strong uptrend in January. GBP/USD reached some elevated levels in late January and the sellers called it a day around 1.43. Since then, this pair has been following a downtrend losing more than 600 pips during this time.
We have heard mixed comments from Bank of England (BOE) officials in the last several days. Some of the comments were hawkish, though the market didn’t seem to react. Then there were some dovish comments over the weekend from Haldane when he said that there’s no rush in hiking interest rates.
GBP/USD jumped higher after the CPI report
The forex market became confused, leaving the GBP prone to economic data. The first round of economic data this week was today’s inflation report from the UK. The yearly CPI (consumer price index) was expected to decline by 0.1%, but it remained 3%.
The core CPI number jumped two points higher to 2.7% from 2.5%. All inflation numbers are above the BOE’s 2% target. This puts more pressure on the BOE to hike interest rates and GBP/USD is about 70 pips higher and still climbing.
Although some of this move is due to USD weakness, the picture of GBP/USD is slightly bullish now. The retail sales report is scheduled for Friday, which might change the sentiment again, but there’s plenty of time until then.