- US consumer prices rose 0.3% for the month and posted a 3.4% annual gain.
- Traders believe the BoE’s benchmark rate will decline rapidly this year.
- Recent data points to a contraction in the UK economy in October.
GBP/USD price analysis hinted at a subtle decline amid a strong dollar as investors weighed the impact of an upbeat US inflation report. However, there are still expectations that the Federal Reserve could cut rates as early as March.
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Namely, consumer prices in the USA rose by 0.3% in December and recorded an annual growth of 3.4%. This beat economists’ expectations of a 0.2% rise and a 3.2% annual increase.
Meanwhile, Bank of England Governor Andrew Bailey refrained from discussing the UK’s economic outlook on Wednesday. However, he highlighted the reduction in mortgage rates.
At the same time, market perception has shifted towards the belief that the BoE benchmark rate will decline rapidly this year. Moreover, futures markets indicate that traders expect around four rate cuts in 2024, possibly as early as May, but certainly by June.
Elsewhere, recent data points to a contraction in the UK economy in October, raising the risk of a recession. The chief executive of Tesco, the UK’s biggest retailer, expressed “cautiously optimistic” about UK consumers in 2024. Meanwhile, Sainsbury’s reported strong sales of Christmas food but saw weak demand for other essentials products.
Significantly, the pound has emerged as one of the best performing currencies against the dollar in 2023, gaining 5.2%, the most in six years. It was supported by some of the highest interest rates among developed economies.
GBP/USD key events today
- US PPI report
- US core PPI report
GBP/USD Price Technical Analysis: Bulls are approaching strong resistance at 1.2800
On the technical side, GBP/USD is bullish as the price is trading above and respecting the 30-SMA support line. At the same time, the RSI respects the key level of 50 as support, remaining in bullish territory.
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However, on a larger scale, the pound is trading in a range with support at 1.2600 and resistance at 1.2800. Accordingly, the current bullish move could be stopped at the resistance of the 1.2800 range. The bullish move can only continue if the price breaks out of the consolidation. Otherwise, bears will take over at 1.2800 and target the support level of 1.2600.
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