GBP/USD Faces First Real Test Ahead of US CPI Data

GBP/USD Speaking Factors and Evaluation:

  • UK PM Boris Johnson beneath strain amid studies of extra lockdown events
  • US CPI, Fed speeches and UK GDP kind a part of main danger occasions this week
  • GBP/USD bull run coming beneath menace forward of pink sizzling US inflation knowledge print

Investigation into UK PM Boris Johnson’s Lockdown Get together Heats up

Stories out of Britain counsel that as many as 100 staffers had been invited to a “deliver your personal booze” drinks occasion in the course of the peak lockdown interval in Could of 2020. This isn’t the primary time Johnson’s management is being questioned as late final yr his occasion suffered a stunning defeat within the by-election for the North Shropshire area – historically a stronghold for the Conservative occasion – which Johnson took full accountability for. As extra info turns into out there, it’s more likely to weigh additional on the Pound as rising discontent opens the door to PM successor talks.

Key Threat Occasions within the Week Forward

After a fairly quiet first buying and selling week, the financial calendar has actually began to take form. Later in the present day Fed Chair Jerome Powell is because of attend his re-election listening to whereas Friday sees UK GDP knowledge for November in addition to US retail gross sales and the College of Michigan’s shopper sentiment preliminary knowledge for January.

Nonetheless, the massive ticket merchandise is the US CPI print on Wednesday given rising costs and power prices and the impact this has on the long run path of financial coverage. Whereas the hawkish pivot from throughout the Fed takes form, markets could look to the forecast variety of 7% as affirmation that the Fed will go away no stone unturned with regards to reigning in inflation however any official response will have to be noticed.

economic calendar

Supply: DailyFX financial calendar

GBP/USD Key Technical Ranges

Sterling continues its spectacular efficiency towards the greenback however now faces an vital take a look at of trendline resistance (drawn from the 2021 excessive). Whereas the RSI flirts slightly below overbought territory, there are many danger occasions over the following week that that might add to GBP/USD volatility.

Waiting for tomorrow’s US CPI knowledge, it appears extra probably {that a} sizzling inflation print sends the greenback greater as expectations of a number of charge hikes grow to be additional entrenched. Consequently, we may even see a pullback within the pair round resistance, barring a shock within the precise knowledge to the draw back. US CPI is forecast to achieve 7%, the very best it has been in practically 40 years.

GBP/USD Each day Chart

GBP/USD daily chart

Chart ready by Richard Snow, IG

A minor retracement may see 1.3515 as the following stage of assist with a deeper transfer highlighting 1.3410 and 1.3400. A shock CPI print coming in decrease than the prior studying of 6.8% may see a brief drop within the crowded greenback, presumably leading to a GBP/USD bullish continuation in the direction of 1.3675

— Written by Richard Snow for DailyFX.com

Contact and observe Richard on Twitter: @RichardSnowFX


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