- GBPUSD reverses the previous day’s corrective pullback, holds lower ground near intraday bottom of late.
- UK Presidential candidates remain mostly intact on Brexit bias while struggling to offer more than tax cuts.
- British data-dump teased buyers but US inflation, hawkish Fedspeak exert downside pressure.
- US PPI, Jobless Claims can direct intraday moves, risk catalysts are the key.
GBP/USD fades bounce off intraday low while also reversing the previous day’s rebound as sellers dominate around 1.1865 during early Thursday morning in Europe. The Cable pair cheered upbeat UK data the previous day but lost the battle against the 40-year high US inflation and hawkish Fedspeak. Also weighing the pair is the political crisis in the UK after Boris Johnson resigned.
The higher-than-expected monthly prints of the British Gross Domestic Product (GDP), Industrial Production and Manufacturing Production for May favored the GBP/USD buyers the previous day. That said, softness in the trade deficit for the said month also helped the Cable buyers to mark a surprise entry.
However, Fed policymakers recently favored the market’s hawkish bias while tracking the 40-year high US inflation data, which in turn drowned the GBP/USD afterward. Recently, San Francisco Federal Reserve Bank President Mary Daly said that her most likely posture is a 75bp hike in July but a 100bp is possible, as reported by the New York Times. Before that Richmond Federal Reserve President Thomas Barkin conveyed his support for higher rates in the last meeting while Cleveland Federal Reserve President Loretta Mester also said, “The data on CPI does not suggest a rate hike in July any smaller than that in June.”
It’s worth noting that the US Consumer Price Index (CPI) for June jumped to the highest level in 40 years to 9.1% YoY versus 8.8% expected and 8.6% prior. The Core CPI, which excludes volatile food and energy prices, eased to 5.9% from 6% prior but crossed analysts' forecast of 5.8%. It should be noted that the BOC announced a 100 bps rate hike by crossing the market forecasts the previous day.
Following the US data, White House (WH) Economic Adviser Brian Deese told CNBC that the CPI data shows the urgency for Congress to pass legislation to spur semiconductor manufacturing in the US, as reported by Reuters. On the other hand, US President Joe Biden mentioned that CPI data is ‘out of data’ as gas prices have fallen.
Elsewhere, a successive third month of cooling home demand in the UK joins fears of more Brexit drama, despite the change of British leader, also exerting downside pressure on the GBP/USD prices.
Amid these plays, the US 10-year Treasury yields rose four basis points (bps) to 2.95% at the latest while the S&P 500 Futures drop 0.20% to portray the risk-off mood and favor the US dollar.
Moving on, US Producer Price Index for June and the weekly Jobless Claims will decorate the calendar and entertain GBP/USD traders. However, major attention will be given to the Fedspeak and risk catalysts like chatters surrounding recession.
Technical analysis
Wednesday’s Doji candlestick joins oversold RSI to tease GBP/USD buyers but a clear upside break of the 13-day-old resistance line, near 1.1950, appears necessary for the bulls to take entry. On the contrary, the monthly support line restricts immediate declines of the Cable pair around 1.1850.