GBP/USD Eyeing Higher Prices Ahead of Widely Watched UK CPI Data

Steffy Bogdanova
April 19, 2023 8:17 am

This article was submitted by Aaron Hill from FP Markets.

UK Inflation

7:00 am GMT+1 on Wednesday will see the latest UK inflation data released by the Office for National Statistics (ONS). Economists’ estimates call for a nudge back into single digits for the YoY measure for March, with Bloomberg’s median estimate at 9.8%. Yet, the estimate range spans between a high of 10.1% and a low of 9.4%. Core UK inflation (excluding the volatile food, energy, alcohol, and tobacco items) also shows that the median Bloomberg consensus heading into the event forecasts core inflation to cool to 6.0% in the twelve months to March, down from February’s 6.2% rate. The forecast range sits between a high of 6.3% and a low of 5.6%.

GBP/USD Eyeing Higher Prices Ahead of Widely Watched UK CPI Data, FP MarketsSource: Bloomberg

UK Jobs Data

The inflation print comes a day after the UK’s unemployment rate rose 0.1 percentage points to 3.8% in the three months to February, up from 3.7%. Vacancies also dipped for a ninth successive month, and average pay—excluding bonuses—was higher than expected at 6.6% in the three months to February (economists called for a decline in wage growth at 6.2% [the forecast range sat between 6.3% and 6.0%; therefore, the release came in above the maximum forecast]).

BoE Rate Hike?

Markets are pricing in an 80% probability of another 25 basis-point increase at the next BoE meeting on 11 May over a 20% chance of the central bank pressing the pause button. Should the BoE hike rates, this will pull the Bank Rate to 4.5%. However, the noted probabilities will likely change following tomorrow’s inflation print, particularly if the headline or core releases print outside the aforementioned estimate ranges.

Reduced retail sales curbs the pound

GBP/USD Currency Pair Projecting Further Upside

Kicking things off with a look at where we are on the weekly scale, buyers appear reluctant to push beyond YTD tops. Still, the weekly chart demonstrates scope to approach as far north as resistance from $1.2767, a long-term horizontal base sharing chart space with a trendline resistance from the high of $1.4250.

Support calls for attention on the daily scale at $1.2272; albeit somewhat far off at the moment, resistance is visible beyond the $1.2640ish peaks at $1.2761, which happens to converge with a 1.618% Fibonacci projection at $1.2775 and a 61.8% Fibonacci retracement at $1.2765. While the trend faces northbound on both the weekly and daily timeframes—supported by the Relative Strength Index (RSI) rebounding from trendline resistance turned support drawn from the high 69.44—traders are urged to pencil in the possibility of a correction to retest the $1.2272 support before taking on higher levels.

As evident from the H1 timeframe, you must feel for those traders who have attempted to fade $1.24 and $1.25 since the beginning of April. Bull and Bear traps come to mind. According to chart studies here, I find it hard to believe that H1 action will deviate far from between the said psychological numbers before the UK inflation print. With that being said, following the release, support from $1.2293 (positioned just south of $1.23) could make a show, as could $1.2538 resistance. The latter is nestled just north of $1.25, which could see price run stops above the round number.

GBP/USD Eyeing Higher Prices Ahead of Widely Watched UK CPI Data, FP MarketsCharts: TradingView

Following the Bank of Canada (BoC) hitting the pause button on policy tightening, the Reserve Bank of Australia (RBA) followed suit at its previous meeting. Read More…

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Opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

LeapRate Analyst

Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
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