- GBP/USD remained well supported by the latest optimism over a possible Brexit deal.
- Softer-than-expected UK CPI did little to provide any meaningful impetus to the pair.
- The key focus will remain on Brexit headlines and the FOMC monetary policy decision.
The GBP/USD pair extended its sideways consolidative price action and held steady above mid-1.3400s post-UK macro releases.
Following a brief consolidation through the Asian session on Tuesday, the pair managed to gain some positive traction and built on the previous day’s strong rally of around 190 pips. Renewed optimism that the UK is heading towards a Brexit deal continued underpinning the British pound and was seen as a key factor lending some support to the GBP/USD pair.
The GBP bulls seemed rather unaffected by Wednesday’s softer-than-expected UK consumer inflation figures. In fact, the headline CPI unexpectedly fell by 0.1% MoM in November as against consensus estimates pointing to a 0.1% rise. Adding to this, the yearly rate eased from 1.5% previous and came in to show a 1.1% rise as compared to 1.4% anticipated.
Meanwhile, the UK core CPI, which excludes volatile food and energy items, also fell short of market expectations and largely offset slightly better than expected Produce Price Index. The data, however, did little to influence the sterling or provide any meaningful impetus to the GBP/USD pair as the key focus remains on developments surrounding the Brexit saga.
On the other hand, the US dollar languished near two-and-half-year lows amid hopes for additional US fiscal stimulus measures. That said, investors now seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the latest FOMC monetary policy update, scheduled to be announced later during the US trading session.
In the meantime, the release of flash UK PMI prints and the US monthly Retail Sales data will be looked upon for some short-term trading opportunities. Apart from this, the incoming Brexit-related headlines will continue to play a dominant role in influencing the GBP price dynamics and infuse some volatility around the GBP/USD pair.
Technical levels to watch
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