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GBPUSD Waiting for the UK Inflation Data

2/15/2023 10:47 AM

The GBP/USD pair is trading with a weak downward trend, holding near 1.2150. The day before, the pound made a rather active attempt to grow, which was supported by the publication of statistics on consumer inflation in the US, but closer to the close of the day session, the instrument lost most of its gains.

The Consumer Price Index corrected in January from 6.5% to 6.4%, and the Core CPI adjusted from 5.7% to 5.6%. This intensified speculations around the possible approach of the US Federal Reserve to the end of the current cycle of monetary tightening. A 25 basis point increase in the interest rate during the regulator's meeting at the end of March is seen as a very likely scenario, but in the future the Fed may well take a wait-and-see attitude.

Some support for the pound, in turn, was provided by macroeconomic data on the UK labor market. Average Earnings Excluding Bonus in December showed an increase of 6.7% after 6.5% in the previous month, and the Claimant Count Change in January showed a sharp decrease by 12.9 thousand after a decrease of 3.2 thousand a month earlier. The Unemployment Rate remained at 3.7% in December, while Employment increased by 74.0 thousand, significantly exceeding the forecast of 40.0 thousand and the November figure of 27.0 thousand. In general, the British labor market looks confident, but the increase in wages reinforces the fears of the Bank of England about the preservation of fundamental incentives for the current inflation growth, which, in turn, may push officials to further increase the cost of borrowing.

The focus of investors' attention is statistics on consumer inflation in the UK for January. Forecasts suggest a slowdown in annual rates from 10.5% to 10.3%.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range is actively narrowing, reflecting the emergence of upward trading dynamics in the short term. MACD is growing preserving a weak buy signal (located above the signal line). Stochastic shows a more confident growth and is currently approaching the level of "80", which increases the risks associated with an overbought pound in the ultra-short term.

Resistance levels: 1.2192, 1.2240, 1.2311, 1.2400. | Support levels: 1.2150, 1.2084, 1.2000, 1.1900.

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