UK Inflation Rises
GBP is in focus today on the back of the latest UK inflation data released this morning. Annualised UK CPI was seen rising to 3.8% last month, up from 3.6% prior and above the 3.7% the market was looking for. Core CPI was similarly higher at 3.8%, above both the prior and expected 3.7% level. At this level, inflation has risen for two-consecutive months and is now at 18-month highs. Notably too, the breakdown of the data shows that services inflation (the reading the BOE has been most concerned with this year) was seen rising back up to 5% from 4.7% prior.
Market Reaction
Despite the data, GBP hasn’t gained much ground with GBPUSD seeing only light upside following the release. The market reaction suggests that the data hasn’t materially shifted traders’ BOE easing expectations. The BOE signalled at its last meeting that it was likely nearing the end of its easing cycle. On the back of that guidance, the market still sees one more cut this year. However, if we see another upside inflation print on the back of today’s data that could derail easing expectations altogether, leading to a fresh move higher in GBP.
FOMC Minutes Next
Looking ahead today, traders will now turn to the FOMC minutes. Given today’s bullish GBP data, any dovishness and subsequent USD weakness should help the pair push higher. However, if the Fed strikes a more neutral tone in the minutes, GBPUSD could remain capped ahead of Friday’s Jackson Hole symposium.
Technical Views
GBPUSD
For now, GBPUSD remains atop the 1.3427 level following the break of the bear trend line from YTD highs. While this level holds as support, focus is on a continuation higher with 1.3631 the next level to watch ahead of the 1.3748 level above.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.