Inflation in the UK hit forty-one year high in October, with a shocking 11.1% y/y CPI print. After that inflationary pressures showed moderation and today 's data showed that the Consumer Price Index eased further to +10.5% in December.
We are now more than a year since the Bank of England started its tightening cycle and after nine consecutive hikes, that brought rates to 3.5%, it looks like it has started yo make a dent to inflation. However headline CPI remains well into double-digits, while the Core index persisted at 6.3% y/y.
The US Fed meanwhile, has a clear hawkish stance, but markets expect another slowdown in the pace of tightening in the upcoming meeting and price in a 25 basis points increase. The US central bank has not pushed back against those expectations and if officials intend to produce a bigger move, they have some work to do over the coming days if they don't want to surprise markets.
As such, speeches by policy makers will be closely watched as the communication blackout period kicks-in at the end of the week. We also expect Retail Sales from the US and the UK, among other data points.
Hopes for a Fed pivot works against the greenback, helping GBP/USD to start the new year on the offensive. Today it moves past 1.2300 and puts the December high in its crosshair (1.2447), but bulls will likely need fresh impetus for tackling 1.2667.
On the other hand, the Relative Strength Index (RSI) hit the most overbought levels in a month and this can cause pressure back towards the EMA200 (at around 1.2080). The downside seems well protected though, with a thick daily Ichimoku Cloud and a strong catalyst would be required for 1.1840 to come into question.
Senior Market Specialist
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.
Retrieved 05 Feb 2023 https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/december-2022