== KEY TAKEWAYS ==
+ There were four-month lows for the pound sterling relative to the US dollar.
+ It appears that GBP/USD will be vulnerable coming up to UK inflation week.
+ The pound sterling maintains its bearish technical indication target at 1.2400.
The US dollar (USD) continued to lose ground against the pound sterling (GBP), causing the GBP/USD pair to drop below 1.2500 for the first time in four months.
The pound sterling continues to decline.
GBP/USD sellers made a strong comeback this week following a respectable recovery in the earlier part of the week due to renewed demand for the US Dollar. Rising geopolitical tensions in the Middle East and expectations surrounding the US Federal Reserve's (Fed) policy turn contributed to the Greenback's rise to its highest level against its main peers in five months, above 105.00.
The US Consumer Price Index (CPI), the week's primary event risk, came in hotter than anticipated, dashed hopes for a June Fed rate cut. According to data provided by the US Bureau of Labor Statistics (BLS) on Wednesday, the US CPI increased 0.4% MoM in March, exceeding predictions of 0.3%. In the same time frame, the Monthly Core CPI increased by 0.4% as well, exceeding estimates of 0.3%. Against the 3.4% market estimate, the yearly headline CPI increased by 3.5%.
Compared to the around 52% odds observed prior to the data release, markets are now pricing in only a 22% possibility of the Fed cutting rates in June. There is a 70% chance that the Fed will decrease rates during its September meeting.
The rationale for delaying the Fed's policy change was further reinforced by the hot US core Producer Price Index (PPI) for March, hawkish remarks from a number of Fed policymakers, and the minutes of the Fed's March meeting. All of these factors combined to keep inflation high despite a robust economy.
The US and its allies believe major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent, in what would mark a significant widening of the six-month-old conflict, according to a Wednesday Bloomberg report that cited people familiar with the intelligence.
Concurrently, Russia, Germany, and the United Kingdom united on Thursday to urge Middle Eastern nations to exercise moderation, particularly in light of the growing danger of an impending Iranian attack on Israel. Israel declared that it was getting ready to "meet all its security needs" in case Iran launched an airstrike.
This comes after Iran threatened to exact revenge for the airstrike that killed a senior Iranian general and six other Iranian military officers on April 1st at its embassy compound in Damascus, Syria, raising tensions that were already high due to the Gaza conflict.
Severe geopolitical concerns continued to hurt the safer-haven US dollar while strengthening the higher-yielding pound sterling. However, Megan Greene, a policymaker at the Bank of England (BoE), gave some consolation to the British Pound with her hawkish remarks. Greene hinted on Thursday that rate cuts from the BoE are still a ways off, saying that "UK services inflation remains much higher than in the US."
In the face of persistent US Dollar strength on Friday, GBP/USD remained susceptible despite a slight recovery from four-month lows of 1.2511. The solid industrial data for February and the UK GDP, which was estimated to be in line with expectations, did not inspire the buyers of pound sterling.
Following a 0.3% recovery in January, the Office for National Statistics (ONS) released its most recent figures on Friday, indicating that the UK economy grew by 0.1% in February. In the stated period, a 0.1% expansion was anticipated by the market. According to additional UK data, February saw monthly increases in manufacturing and industrial production of 1.2% and 1.1%, respectively.
The week ahead: UK CPI remains on tap
After a hectic week, traders of the pound sterling are getting ready for a data-light week, with the UK CPI inflation report for March serving as the sole major event.
On Wednesday, the inflation statistics will be made public. Prior to that, policymaker Sarah Breeden of the BoE will speak earlier that day, while the US docket will include the March Retail Sales report on Monday.
Tuesday is when the UK jobs data is expected to be released. BoE Governor Andrew Bailey is scheduled to appear at the International Monetary Fund (IMF) Spring Meetings later that day.
On Wednesday, Bailey will talk once more at the Institute of International Finance Global Outlook Forum.
The US weekly Jobless Claims and the Existing Home Sales figures for March will be released on Thursday.
Lastly, following the publication of the UK Retail Sales figures for March, BoE officials Dave Ramsden and Sarah Breeden will make their scheduled appearances on Friday.
Additionally, market participants will be keenly examining the remarks made by Fed policymakers to see if they support the bets on postponed rate decreases.
GBP/USD: Technical Outlook
Technically speaking, the short-term outlook for GBP/USD is still bearish as sellers attempt to prolong the decline from the rising channel that was seen a few weeks ago.
The 14-day Relative Strength Index (RSI) indicator is still susceptible to further falls because it is still below the midline, close to 40.00.
The sellers of pound sterling produced a long-lasting breach below the 200-day SMA, which is horizontal and located around 1.2584, supporting the bearish bias.
In order to continue the decline toward the low of 1.2449 on November 22, sellers must establish a firm foothold below the 1.2500 round number. The lows of November 16 and 17 line at 1.2375, which is the location of the next significant support.
Alternatively, the short-term selling pressure may lessen if buyers are able to consistently close above the 200-day SMA at 1.2584.
A significant rebound in the GBP/USD pair might then occur, heading toward the confluence resistance zone between the 1.2650 and 1.2670 area. The convergence of the 21-day, 50-day, and 100-day SMAs is located there.
For buyers of pound sterling, the rising channel support that turned resistance at 1.2790 will be a difficult nut to crack further up.
+ There were four-month lows for the pound sterling relative to the US dollar.
+ It appears that GBP/USD will be vulnerable coming up to UK inflation week.
+ The pound sterling maintains its bearish technical indication target at 1.2400.
The US dollar (USD) continued to lose ground against the pound sterling (GBP), causing the GBP/USD pair to drop below 1.2500 for the first time in four months.
The pound sterling continues to decline.
GBP/USD sellers made a strong comeback this week following a respectable recovery in the earlier part of the week due to renewed demand for the US Dollar. Rising geopolitical tensions in the Middle East and expectations surrounding the US Federal Reserve's (Fed) policy turn contributed to the Greenback's rise to its highest level against its main peers in five months, above 105.00.
The US Consumer Price Index (CPI), the week's primary event risk, came in hotter than anticipated, dashed hopes for a June Fed rate cut. According to data provided by the US Bureau of Labor Statistics (BLS) on Wednesday, the US CPI increased 0.4% MoM in March, exceeding predictions of 0.3%. In the same time frame, the Monthly Core CPI increased by 0.4% as well, exceeding estimates of 0.3%. Against the 3.4% market estimate, the yearly headline CPI increased by 3.5%.
Compared to the around 52% odds observed prior to the data release, markets are now pricing in only a 22% possibility of the Fed cutting rates in June. There is a 70% chance that the Fed will decrease rates during its September meeting.
The rationale for delaying the Fed's policy change was further reinforced by the hot US core Producer Price Index (PPI) for March, hawkish remarks from a number of Fed policymakers, and the minutes of the Fed's March meeting. All of these factors combined to keep inflation high despite a robust economy.
The US and its allies believe major missile or drone strikes by Iran or its proxies against military and government targets in Israel are imminent, in what would mark a significant widening of the six-month-old conflict, according to a Wednesday Bloomberg report that cited people familiar with the intelligence.
Concurrently, Russia, Germany, and the United Kingdom united on Thursday to urge Middle Eastern nations to exercise moderation, particularly in light of the growing danger of an impending Iranian attack on Israel. Israel declared that it was getting ready to "meet all its security needs" in case Iran launched an airstrike.
This comes after Iran threatened to exact revenge for the airstrike that killed a senior Iranian general and six other Iranian military officers on April 1st at its embassy compound in Damascus, Syria, raising tensions that were already high due to the Gaza conflict.
Severe geopolitical concerns continued to hurt the safer-haven US dollar while strengthening the higher-yielding pound sterling. However, Megan Greene, a policymaker at the Bank of England (BoE), gave some consolation to the British Pound with her hawkish remarks. Greene hinted on Thursday that rate cuts from the BoE are still a ways off, saying that "UK services inflation remains much higher than in the US."
In the face of persistent US Dollar strength on Friday, GBP/USD remained susceptible despite a slight recovery from four-month lows of 1.2511. The solid industrial data for February and the UK GDP, which was estimated to be in line with expectations, did not inspire the buyers of pound sterling.
Following a 0.3% recovery in January, the Office for National Statistics (ONS) released its most recent figures on Friday, indicating that the UK economy grew by 0.1% in February. In the stated period, a 0.1% expansion was anticipated by the market. According to additional UK data, February saw monthly increases in manufacturing and industrial production of 1.2% and 1.1%, respectively.
The week ahead: UK CPI remains on tap
After a hectic week, traders of the pound sterling are getting ready for a data-light week, with the UK CPI inflation report for March serving as the sole major event.
On Wednesday, the inflation statistics will be made public. Prior to that, policymaker Sarah Breeden of the BoE will speak earlier that day, while the US docket will include the March Retail Sales report on Monday.
Tuesday is when the UK jobs data is expected to be released. BoE Governor Andrew Bailey is scheduled to appear at the International Monetary Fund (IMF) Spring Meetings later that day.
On Wednesday, Bailey will talk once more at the Institute of International Finance Global Outlook Forum.
The US weekly Jobless Claims and the Existing Home Sales figures for March will be released on Thursday.
Lastly, following the publication of the UK Retail Sales figures for March, BoE officials Dave Ramsden and Sarah Breeden will make their scheduled appearances on Friday.
Additionally, market participants will be keenly examining the remarks made by Fed policymakers to see if they support the bets on postponed rate decreases.
GBP/USD: Technical Outlook
Technically speaking, the short-term outlook for GBP/USD is still bearish as sellers attempt to prolong the decline from the rising channel that was seen a few weeks ago.
The 14-day Relative Strength Index (RSI) indicator is still susceptible to further falls because it is still below the midline, close to 40.00.
The sellers of pound sterling produced a long-lasting breach below the 200-day SMA, which is horizontal and located around 1.2584, supporting the bearish bias.
In order to continue the decline toward the low of 1.2449 on November 22, sellers must establish a firm foothold below the 1.2500 round number. The lows of November 16 and 17 line at 1.2375, which is the location of the next significant support.
Alternatively, the short-term selling pressure may lessen if buyers are able to consistently close above the 200-day SMA at 1.2584.
A significant rebound in the GBP/USD pair might then occur, heading toward the confluence resistance zone between the 1.2650 and 1.2670 area. The convergence of the 21-day, 50-day, and 100-day SMAs is located there.
For buyers of pound sterling, the rising channel support that turned resistance at 1.2790 will be a difficult nut to crack further up.
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