- The UK economy grew by 0.2%, which is in line with economists’ forecasts.
- The US CPI report revealed that inflation was higher than expected in September.
- US jobless claims rose more than expected, pointing to a weaker labor market.
GBP/USD price analysis shows a slight recovery in the pound after data revealed growth in the UK economy. Meanwhile, the dollar was trading near yesterday’s highs after inflation numbers rose more than expected.
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Data on Friday showed that the UK economy grew by 0.2%, in line with economists’ forecasts. However, investors kept their bets on a rate cut by the Bank of England during the November meeting.
Meanwhile, the US CPI report revealed that inflation was higher than expected in September. On a monthly basis, consumer prices rose by 0.2%, above the forecasted 0.1%. Meanwhile, on an annual basis, prices rose by 2.4%, above estimates of 2.3%. The unexpected jump led to a fall in expectations of a Fed rate cut, which boosted the US dollar.
However, jobless claims rose more than expected, pointing to a weaker labor market. The combination of data put bets on a November Fed rate cut of 25 bps at 80%. At the same time, market participants assign a 20% chance that the Fed will keep rates unchanged.
The next big report will be the Producer Price Index. Economists expect wholesale inflation to rise 0.1%, down from 0.2% in August. If wholesale inflation also beats forecasts, expectations for a rate cut will continue to fall.
Meanwhile, markets are paying close attention to tensions in the Middle East. The likelihood of a cease-fire between Israel and Hezbollah has eased fears of escalation. However, there is still a risk of retaliation after Iran attacked Israel.
GBP/USD key events today
- US Core PPI m/m
- US PPI m/m
GBP/USD Price Technical Analysis: Bearish momentum fading near support at 1.3051
On the technical side, the GBP/USD price remains in a tight consolidation near the 1.3051 support level. The bias is bearish as the price is slightly below the 30-SMA. At the same time, the RSI is trading below 50, supporting bearish momentum.
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However, the RSI has made a bullish divergence, indicating weakness in the downtrend. If it plays out, the price could break above the 30-SMA, indicating a bullish reversal. A break above the SMA would allow GBP/USD to revisit the 1.3201 level.
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