- The US consumer inflation report showed a 0.3% jump in core inflation in August.
- The probability of a 50 bps rate cut fell to 15%.
- The UK economy stagnated in July with no expansion.
The GBP/USD forecast shows the dollar in the lead after a jump in US core inflation. At the same time, the pound continued to fall after data earlier this week failed to show economic expansion.
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In August, the long-awaited US consumer inflation report showed a jump in core inflation of 0.3%, higher than the forecast of 0.2% growth. Consequently, this reduced the probability of a 50 bps speed reduction to 15%. The dollar strengthened due to the possibility of a gradual rate cut.
Still, the annual figure eased to 2.5%, inching closer to the Fed’s 2% target. Therefore, inflation is in a clear downward trend. However, there is little pressure on the Fed to begin massive tapering. However, there is still a risk that after the September meeting the data will change and show a rapid decline. In such a case, the Fed could consider a larger rate cut.
Investors will now look to wholesale inflation data later today for more clues about the state of price pressures in the US.
Elsewhere, data on Tuesday revealed that the UK economy stagnated in July with no expansion. Meanwhile, economists expected the economy to grow by 0.2%. The report showed a weaker-than-expected performance, increasing the chances of a Bank of England interest rate cut next week to 25%. Consequently, the pound fell.
GBP/USD key events today
- USA core PPI m/m
- US PPI m/m
- Claims for the unemployed
GBP/USD Technical Forecast: Shallow downtrend reaches 1.3000 barrier
On the technical side, the GBP/USD price fell to the 1.3000 support level before pulling back slightly. Bears remained in control as price action showed momentum building with a solid bearish candle close to the 1.3200 resistance level.
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At the same time, the indicators support the bearish bias, with the SMA above the price and the RSI below 50. However, the price is holding close to the SMA, which is a sign that the bears are not making big swings. Therefore, it could be difficult to break the 1.3000 support. However, the bearish bias will remain if the price remains below the SMA.
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