- Consumer prices in the US rose by 0.2% in October.
- Traders expect Trump’s policies to trigger inflation and pause or significantly slow the Fed’s rate cuts.
- BoE’s Catherine Mann noted that inflation could be higher than expected in the medium term.
The GBP/USD forecast shows the dollar at new highs as the Trump trade overshadows recent inflation figures. As a result, the pound remained weak against the dollar despite sharp remarks from policymakers.
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On Wednesday, the US released its CPI report, which was in line with expectations. In October, consumer prices increased by 0.2%, while base prices increased by 0.3%. Meanwhile, the annual figure rose by 2.6%. With inflation expected to pick up, the Fed is likely to cut borrowing costs in December.
The dollar initially retreated before rising as market participants shifted their focus to Trump’s victory. Traders expect Trump’s policies to trigger inflation and pause or significantly slow the Fed’s rate cuts.
The next major reports will cover wholesale and retail inflation. Producer prices are a leading indicator of future consumer prices. Therefore, rate cut bets may be eased if producer prices are higher than expected. The opposite is also true. Meanwhile, retail sales will show the financial health of consumers. Strong sales will show robust consumer spending, reducing bets on a rate cut. On the other hand, weak sales will indicate weak consumer spending, solidifying bets on a December rate cut.
Meanwhile, in the UK, Bank of England policymaker Catherine Mann noted that inflation could be higher than expected in the medium term. Mann is the only policymaker to vote against a rate cut at the BoE’s last meeting. Market bets on a UK rate cut fell after the government’s new budget was read. The BoE could only cut rates twice next year.
GBP/USD key events today
- Core PPI m/m
- PPI m/m
- Claims for the unemployed
- Fed President Powell is speaking
GBP/USD Technical Forecast: Bearish momentum heading for the 1.2650 level
From the technical side, GBP/USD the price broke below the key support at 1.2750 to make a new low in the downtrend. Moreover, the price is trading well below the 30-SMA, which shows that the bears have a strong lead. At the same time, the RSI is in the oversold region, indicating solid bearish momentum.
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The next target for the pair is at the support level of 1.2650. However, after such a steep collapse, the bulls may be preparing to return for a pullback to the 1.2750 or 30-SMA level.
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