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Focus on inflation once again as weak sterling continues to hurt UK consumers -by Ecork

Pound Sterling Points

  • Spotlight on UK CPI!
  • The Bank of England may move to a 50 basis point hike in August.
  • Sterling remains under pressure despite the short term rally.

GBP/USD Basic Background

Next week’s economic calendar is packed with high-impact events from both the UK and the US (see economic calendar below) with the UK inflation Being the main focus of fairy. Both core and headline inflation numbers have not taken a step back since September last year with expectations looking for another increase. This should increase extremist pressing Bank of England (BoE) for height interest rates by 50 bits per second in August – which they rolled out as an option during their last pricing announcement.

Money markets have been pricing this for some time now but the central bank will need to take into account rising (albeit marginal) unemployment and a slowing UK economy. Inflation is unlikely to reverse monetary policy because we are well aware of the supply problems caused by the Russian/Ukrainian war.

GBP/USD economic calendar

source: DailyFX Economic Calendar

Technical Analysis

British Pounds / US Dollars daily planner

GBP/USD daily chart

The graph was prepared by Warren VenkitasAnd the IG

Daily GBP / USD price movement The recovery appears after the FOMC and Bank of England meeting, but gave up some of the gains on Friday. Bulls find resistance at 20 days EMA Level (magenta) As we get closer to Wednesday’s CPI reading, I don’t see much in the way of significant price moves for the cable. I expect prices to swing between 1.2200 and 1.2400 levels respectively with my medium/long term outlook in favor of the US dollar. While there is still room for an upside in the short term, the key inflection point will be around trendline resistance (black) and whether or not we will see a candle close above (breakout) which could change the mindset to a potential direction. Reflection, reversal, inversion.

Key resistance levels:

  • trend line resistance (black)
  • 1.2494
  • 1.2400
  • 20-day EMA (purple)

Main levels of support:

IG Client Warning

IG customer morale Data (IGCS) shows that retailers are currently on long on me British Pounds / US Dollarswith 71% of traders currently holding long positions (as of this writing). At DailyFX, we usually take a conflicting view of crowd sentiment, however, due to recent changes in long and short positions, we arrive at a mixed short-term bias.

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