- The pound rose on Tuesday as the dollar weakened.
- Data on consumer prices in the US for October indicate a further slowdown in inflation.
- Many analysts believe the Fed’s interest rates have peaked.
GBP/USD price analysis points to a bullish tone as the British pound maintains its position near recent highs reached on Tuesday. However, recent data on the UK consumer price index showed a fall to 5.7% compared to the expected 5.8% and the previous 6.1%. Although the price has pulled back a bit, the uptrend remains intact.
The pound strengthened on Tuesday amid a weaker dollar as US consumer price data for October pointed to a further slowdown in inflation. Consequently, there is a high probability that the Federal Reserve has concluded to raise interest rates.
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US consumer prices remained steady last month due to lower gasoline prices, after rising 0.4% in September. The release of the report led to an immediate drop in the dollar and a sharp drop in Treasury yields. Meanwhile, the benchmark 10-year yield fell below 4.5%.
John Doyle of Monex USA in Washington predicted continued weakening of the dollar until the end of the year, possibly until early January. The market welcomed the data. Furthermore, many analysts believe that the Fed’s interest rates have peaked.
Meanwhile, futures point to a more than 68% chance the Fed will cut interest rates by 25 basis points or more by next May.
In the UK, data showed workers’ wages rose less rapidly in the three months to September. Still, they stayed close to their record pace. However, these figures are unlikely to ease the Bank of England’s concerns about inflationary pressures. Furthermore, they did not change market forecasts for a UK rate cut until June 2024 at the earliest.
GBP/USD key events today
The US will release several major economic reports, including:
- Retail
- Basic retail
- Producer Price Index Report.
GBP/USD Price Technical Analysis: Bullish Momentum Rises to New Highs.
On the technical side, the pound rose to new highs, breaking above key resistance levels. The sudden jump led to the price breaking above the resistance level at 1.2300 and 1.2401. Currently, the bulls have paused below the 1.2501 resistance level.
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Moreover, the strong rally has left the 30-SMA well below the price. Therefore, it may lead to a pause or pullback while the SMA catches up. At the same time, the RSI is deeply overbought, indicating that the bullish momentum has reached extreme levels. That could allow the bears to enter for a return to the 1.2401 support level before the uptrend resumes.
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