GBP/USD Outlook: UK CPI Eases Slightly, All Eyes on US Retail Data

• US PPI was higher than expected, indicating high inflation.
• Inflation in the UK eased slightly in August.
• The BoE is still struggling to contain high inflation.

The GBP/USD outlook is bearish. The pair weakened as the dollar held steady after substantially rising in response to the release of US inflation data on Tuesday that exceeded expectations.

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More inflation numbers were released yesterday from both sides of the Atlantic, with core PPI in the US printing higher than anticipated while UK CPI dipped down slightly below double digits.

It is challenging to predict when the bear trend in the cable will end, given that the UK economy is struggling due to high inflation and an energy shortage. Consumer prices in the UK rose at an annual rate of +9.9% for August. Although it was lower than the 10.2% predicted and down from the 10.1% YoY in July, inflation is still too high for the BoE to consider easing or talking about peak inflation.

In response to the inflation figures, analysts at ING predicted that the BoE would increase interest rates by 50 basis points the following week, with the overall outlook being “sterling negative.”

“Slowing growth and weaker equity markets should leave sterling as an underperformer,” they said.

GBP/USD key events today

The US will release retail sales data that will show the change in the value of sales at the retail level. It is a good indicator of consumer spending. Jobs reports from the US will also show the value of initial jobless claims.

GBP/USD technical outlook: 30-SMA capping bulls from taking over

Looking at the 4-hour chart, we see the price consolidating right below the 30-SMA and the RSI trading slightly below 50. Although bears are still in charge, the market is currently moving sideways. This can be attributed to the resistance offered by the 30-SMA and the support at 1.1501.

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The 30-SMA is the only thing keeping buyers from pushing the price higher. If they fail to break above the SMA, bears will resume the trend by breaking below support at 1.1501 and heading for the next support at 1.1402.

However, if bulls can muster the strength to break above the 30-SMA, the price will likely retest resistance at 1.1701.

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