- The consumer price index in Great Britain rose by 2.2 percent less than expected in July.
- UK services inflation rose 5.2% in July after increasing 5.7% in the previous month.
- US PPI rose 0.1% in July, missing forecasts.
The GBP/USD forecast is slightly dovish as softening UK consumer inflation data increases expectations for a rate cut by the Bank of England. Still, the larger bullish trend remains intact as the dollar weakens after poor US wholesale inflation data.
–Are you interested in learning more about STP brokers? Check out our detailed guide-
Data on Wednesday revealed that the UK consumer price index rose by 2.2% in July. The value rose above the Bank of England’s 2% target for the first time in two months. However, that was a smaller increase than the forecast of 2.3%.
Meanwhile, services inflation rose 5.2% in July after increasing 5.7% in the previous month. This decline is a significant relief for the BoE. In particular, policy makers remained cautious due to high services inflation.
Although headline inflation reached the central bank’s target, few were prepared to cut borrowing costs as services inflation was a concern. Therefore, the July numbers could give more policymakers confidence to continue cutting interest rates. After the CPI report, traders increased the odds of a BoE cut in September to 48%. Meanwhile, they expect 46 basis points in total rate cuts this year.
On the other hand, the dollar remained fragile following softer-than-expected US wholesale inflation figures. PPI rose 0.1% in July, missing forecasts for a 0.2% increase. As a result, investors are pricing in a higher chance of a 50 basis point Fed rate cut in September. Later today, the CPI report will further shape the outlook for the Fed’s monetary policy.
GBP/USD key events today
- Core US consumer price index m/m
- Consumer Price Index in the USA m/m
- US Consumer Price Index y/y
GBP/USD Technical Forecast: Bullish momentum builds with 0.618 Fib in sight
On the technical side, the GBP/USD price has broken above a strong barrier consisting of the 0.382 Fib and 1.2800 key resistance levels. As a result, the price rose well above the 30-SMA to make a new high. Meanwhile, the RSI is trading near the overbought region.
–Are you interested in learning more about forex earnings? Check out our detailed guide-
Moreover, after the rally, the bears reappeared and pushed the price to retest the recently broken barrier. As the bullish bias remains strong, the next target could be at the 1.2900 level near the 0.618 Fib.
Do you want to trade Forex now? Invest in eToro!
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
