- Persistently rising US inflation signaled interest rates would stay high for longer.
- The annual US inflation number of 6.4% was slightly higher than anticipated.
- Data revealed that British wages increased more quickly than anticipated.
Today’s GBP/USD price analysis is slightly bearish. On Wednesday, the dollar received some support when persistently rising US inflation signaled interest rates would stay high for longer than investors had anticipated.
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January’s headline CPI was 0.5%, primarily due to rising food and rental prices. That was in line with expectations. However, the annual number of 6.4% was slightly higher than anticipated. Traders were busy unwinding bets on the rate lowering by the end of 2023.
Strong wage data gave the pound a lift overnight. The pound increased against the dollar on Tuesday as data revealed that British wages increased more quickly than anticipated in the final three months of 2022. This increased pressure on the Bank of England to keep raising rates to reduce inflation.
The figures released on Tuesday revealed that salary excluding bonuses increased by 6.7%, faster than the 6.5% analysts polled by Reuters had predicted.
The pressure to keep hiking rates will increase since there are indications that price and wage increases are becoming entrenched, which would generally strengthen the pound.
The annual inflation rate decreased to 10.5% in December, but the data for January, due on Wednesday, is expected to show that it was still more than five times the Bank’s target of 2% at 10.3%.
On March 23, the Bank of England is expected to increase its interest rates by 25 basis points, bringing the benchmark rate to 4.25%, before pausing.
GBP/USD key events today
British inflation data is expected later in the day; the annual headline CPI is expected to rise to a staggering 10.3%, more than five times the Bank of England’s 2% target.
GBP/USD technical price analysis: Bears target the 1.2040 support
The 4-hour chart shows GBP/USD trading below the 30-SMA after touching the 1.2251 resistance level. The RSI has also crossed below the 50-mark, indicating a shift in sentiment from bullish to bearish.
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The bears are currently eyeing the 1.2040 support level. A break below this level would confirm a new bearish trend. However, the bullish trend might continue if the price fails to close below the 30-SMA.
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Saqib Iqbal
