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  • CPI declines 0.8% in the UK in January.
  • Annual-core CPI in the US stays unchanged at 2.2%.
  • US Dollar Index recovers above 97 on Wednesday.

The GBP/USD pair came under pressure in the European session after the data published by the UK’s Office for National Statistics showed a more severe slowdown than expected in inflation. Although the pair spiked higher on the back of Brexit headlines and turned positive on the day, the broad USD strength in the second half of the day forced the pair to turn south once again. As of writing, the pair was down 0.32% on the day at 1.2855.

The ONS today reported that the CPI on a monthly basis in January contracted by 0.8% following December’s 0.2% increase. Further details of the report revealed that the annual PPI (output) dropped to 2.1% to miss the market expectation of 2.2% and the Retail Price Index (RPI) edged down to 2.5%. After weakening against its rivals following the disappointing data, the British pound gathered strength and lifted the GBP/USD pair to a daily high of 1.2958.  

Commenting on the data, “From the monetary policy point of view, the inflation dropped below the targeted 2% annual rise in January and therefore remains off the radar. For the Monetary Policy Committee (MPC) at the Bank of England though, what matters more is the inflation outlook and the inflation expectations going beyond 2019. In this perspective, strong UK wage growth is of greater importance as it remains fundamentally the most upwards pressing force in the UK economy. This has also been the point the Bank of England made in its February release of the Inflation report,” said FXStreet European Chief Analyst Mario Blascak said.    

Reports of the EU expecting an official request for an extension on Article 50 revived hopes of the Brexit getting delayed rather than the UK crashing out of the EU. Nevertheless, the positive impact on the currency faded out in the NA session as the USD grabbed markets’ attention with the 10-year Treasury Bond yield adding more than 1% for the third straight day on Wednesday. The US Dollar Index, which finished the previous day 0.4% lower, was last up 0.4% on the day at 97.08.

Key technical levels

GBP/USD

Overview:
       Today Last Price:  1.2855
       Today Daily change %:  -0.32%
       Today Daily Open:  1.2896
Trends:
       Daily SMA20:  1.3002
       Daily SMA50:  1.2819
       Daily SMA100:  1.2885
       Daily SMA200:  1.3017
Levels:
       Previous Daily High:  1.291
       Previous Daily Low:  1.2833
       Previous Weekly High:  1.3103
       Previous Weekly Low:  1.2854
       Previous Monthly High:  1.3214
       Previous Monthly Low:  1.2438
       Daily Fibonacci 38.2%:  1.288
       Daily Fibonacci 61.8%:  1.2862
       Daily Pivot Point S1:  1.2849
       Daily Pivot Point S2:  1.2802
       Daily Pivot Point S3:  1.2771
       Daily Pivot Point R1:  1.2926
       Daily Pivot Point R2:  1.2957
       Daily Pivot Point R3:  1.3003