- Services inflation in the UK rose by 5.6%, above expectations for a 5.5% increase.
- The Bank of England is likely to keep rates unchanged this week.
- US sales rose 0.1% when estimates showed a 0.2% decline in August.
The GBP/USD forecast points to bullish optimism after UK services inflation data came in higher than expected. Meanwhile, the dollar was steady after recovering in the previous session on better-than-expected retail sales data.
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Inflation in the UK held steady at 2.2% in August, meeting forecasts. However, market participants focused on services inflation, which rose 5.6%, above expectations for a 5.5% increase. The Bank of England remained cautious despite inflation hitting its target. Policymakers are monitoring stubborn pressures on service prices. The report increased the likelihood that the Bank of England would keep rates unchanged this week.
A separate report found that UK house prices rose by a slower 2.2% in July. However, it was the fifth month in a row that prices rose. A pause by the BoE and a significant rate cut in the US could keep sterling on an upward trajectory.
Notably, the dollar recovered on Tuesday after US retail sales jumped. Sales rose 0.1% when estimates showed a 0.2% decline in August. The increase showed that consumer spending remains strong, pointing to a resilient economy. While he supported a smaller Fed rate cut, it was not enough to significantly change current expectations. Market participants estimate a 63% chance of a rate cut of 50 basis points. Such an outcome could sink the dollar. Furthermore, it will focus on messaging for future policy moves.
GBP/USD key events today
- Federal funds rate
- Economic projections of the FOMC
- FOMC statement
- FOMC press conference
GBP/USD Technical Forecast: Bulls try again at 1.3200
On the technical side, the GBP/USD price is breaking above the resistance level at 1.3200. Earlier, the price briefly crossed this level before pulling back. However, there was an increase in bullish momentum before the price reached the 30-SMA.
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However, to confirm a break above 1.3200, the price must break away from this level to make new highs. In that case, the bulls would likely revisit the 1.3301 level. The bullish trend will continue if the price remains above the 30-SMA with the RSI above 50.
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