- The US released producer price index (PPI) data that was warmer than expected.
- Investors expect just 44 basis points of Fed rate cuts in 2024.
- UK wages minus bonuses rose by 6.0% in the first quarter of 2024.
GBP/USD price analysis shows bullish optimism as dollar falters after US wholesale inflation report. All eyes are now on the imminent release of US consumer inflation data. Meanwhile, the pound recovered after a dive on dovish policy remarks.
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The US released warmer-than-expected producer price index (PPI) data on Tuesday, pointing to still high inflation in the country. Wholesale inflation rose 0.5% in April, beating forecasts for a 0.3% increase. After the report, markets lowered expectations for a Fed rate cut. Currently, investors expect just a 44 basis point cut in 2024. The report initially sent the dollar soaring. However, that move later reversed itself, showing that investors appreciated such an outcome. Therefore, when this happened, they were ready to book profits, which caused the dollar to fall. Investors are now awaiting the CPI report.
Meanwhile, in the UK, employment data revealed strength in the labor market. However, there were signs that conditions were easing, which would allow the Bank of England to start cutting interest rates. Notably, salaries net of bonuses increased by 6.0% in the first quarter of 2024 compared to the same period last year. This was above estimates for a 5.9% increase, which boosted the pound.
But gains were reversed when Bank of England economist Hugh Peel said the central bank could be ready to cut rates by the summer.
GBP/USD key events today
- US CPI report
- US Retail Sales Report
- Empire State Manufacturing Index
GBP/USD technical price analysis: Price is returning to the 1.2600 level with renewed momentum
On the technical side, the GBP/USD price is retesting the 1.2600 resistance level after finding support at the 30-SMA. The bullish bias is strong, with the price well above the SMA and the RSI near the overbought region.
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The price continued its bullish trend after finding support at the 0.5% Fib retracement level. The bulls made a candle that swallowed, which led to a breakout above the SMA. After that, they confirmed the new bias by retesting the SMA as support. Therefore, there is a good chance that the price will break 1.2600 and climb to retest the psychological level of 1.2700.
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