GBP/USD Rate Surges to Two-Month High After Inflation News
Today, the Consumer Price Index (CPI) figures for the UK were published. According to ForexFactory:
Annual CPI: actual = 2.3%; expected = 2.1%; previous = 3.2%.
Annual Core CPI: actual = 3.9%; expected = 3.6%; previous = 4.2%.
Thus, it can be asserted that:
The current inflation level is at its lowest since 2021.
It is close to the target levels of 2%.
However, economists polled by Reuters had expected a sharper drop to 2.1%, based on falling energy prices.
Additionally, inflation in the services sector (a key indicator monitored by the Bank of England due to the dominance of this sector in the UK economy) only slightly decreased to 5.9% from 6%.
As a result, CNBC reports that market participants have reduced the likelihood of the Bank of England easing monetary policy:
The probability of a rate cut in June has decreased to 15% compared to 50% before the inflation news was published.
The probability of a rate cut in August was estimated at 40% compared to 70% before the publication.
The currency market reacted with a surge in volatility the GBP/USD rate jumped to a two-month high, reaching the 1.27555 level. However, as the market absorbed the data, the price began to gradually decline.
Technical analysis of the daily GBP/USD chart shows that:
The price is within a large narrowing triangle consolidation that started in 2023.
Within this triangle, the 1.2800 level plays a significant role it provided resistance both last year and in 2024.
Todays candlestick may form a long upper shadow, indicating continued bearish activity around the 1.2800 level.
This bearish activity could drive the price down to the lower boundary of the ascending channel (shown in black), which describes the trajectory of the GBP/USD price movement from the lower to the upper boundary of the triangle since mid-April.
At 21:00 GMT+3 today, the FOMC Meeting Minutes will be published they are likely to have a strong impact on the dollar's exchange rate against other currencies. Be prepared for spikes in volatility.
Read more: https://fxopen.com/blog/en/oa-gbp-usd-rate-surges-to-two-month-high-after-inflation-news/
Text source: Forex Trading Blog
