GBP/USD Falls After US & UK Inflation Data

  • GBPUSD
    (${instrument.percentChange}%)

GBP/USD Analysis

The headline US Consumer Price Index moderated to 3.1% y/y in January, but core stayed at 3.9%, while all data (monthly and yearly) were above forecasts. The greenback strengthened as market are coming to accept the Fed's conservative stance around a pivot. The timing of the first cut has now been pushed back to June and markets expect rates to fall by 100 basis points by the end of the year, coming closer to the Fed's projection (of 90 bps).

Today's UK CPI report also showed persistence, as core inflation stayed at 5.1% y/y and headline at 4%y/y. Unlike the US release though, these were below estimates, while the monthly CPI contracted by 0.6%, making the biggest fall in a year. The Pound reacted lower, with markets believing these figures will allow the Bank of England to lower rates substantially. In a CNBC interview at the start of the month, Governor Bailey did not object to market pricing for 4-5 cuts this year. [1]

GBP/USD drops for second straight day, testing again the 38.2% Fibonacci, which bring 1.2307 in the spotlight. Fresh catalyst would likely be needed for this levels to challenged though.

Inflation is lower in the US and the central bank has clearly pointed to lower rates this year, whereas its UK peer sounds more hawkish and has more work to do on inflation. GBP/USD has managed to react form current levels in the recent past and may get the chance to push towards 1.2828, but does not inspire much confidence for sustained strength above it.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 24 Jul 2024 https://www.cnbc.com/video/2024/02/01/watch-cnbcas-full-interview-with-the-bank-of-englandas-andrew-bailey.html

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