- GBP/USD fails to cheer upbeat British inflation data, extends pullback from key resistance line.
- UK CPI rose to 10.1% YoY in September versus 10% expected, 9.9% prior.
- BOE’s QT, U-turn from “mini-budget” keep buyers hopeful but British political jitters, hawkish Fedbets challenge upside moves.
GBP/USD extends pullback from a short-term crucial resistance despite upbeat UK inflation data, published during early Wednesday morning in London. In doing so, the Cable pair renews its intraday low around 1.1300.
As per the latest inflation data from the UK Statistics, the headline Consumer Price Index (CPI) refreshes a 30-year high with a 10.1% YoY figure versus 10.0% expected and 9.9% prior.
Also read: Breaking: UK annualized inflation rises to 10.1% in September vs.10.0% expected
That said, the reduction in UK Chancellor Jeremy Hunt inspired optimism, due to the reversal of “mini-budget” proposals, which weigh on the GBP/USD prices. The reason for the British market’s latest pessimism could be linked to a fresh political plot to topple Prime Minister Liz Truss and recall the ex-leader Boris Johnson. Even so, Reuters mentioned that British Prime Minister Liz Truss warned of tough times ahead after she scrapped her vast tax-cutting plan and said she would carry on to try to put the economy on a stronger footing, defying calls for her resignation.
On the other hand, the Bank of England (BOE) again turned down the Financial Times (FT) news suggesting the “Old Lady”, as the UK central bank is informally known, will delay the Quantitative Tightening (QT) amid shaky gilt markets. While doing so, the British central bank stated, per Reuters, that it would start selling some of its huge stock of British government bonds from Nov. 1 but would not sell this year any longer-duration gilts that have been in the eye of a recent storm in the British government bond market. Despite the hawkish BOE, traders remain doubtful and weigh on the Cable prices.
Elsewhere, the US Dollar Index (DXY) picks up bids while tracking the recently firmer US Treasury yields amid sluggish early hours of trading in the West. That said, the US 10-year Treasury yields added three basis points (bps) near 4.03% mark at the latest. The uptick in the US bond coupons could be linked to the latest hawkish Fedspeak despite the mixed data. Earlier in the day, Minneapolis Federal Reserve Bank President Neel Kashkari said, “Until I see some compelling evidence that core inflation has at least peaked, not ready to declare a pause in rate hikes.” With this, the CME’s FedWatch Tool signals that markets are pricing in a nearly 95% chance of the Fed’s 75 rate hike in November.
Moving on, the recently firmer yields and the UK’s political pessimism may challenge the GBP/USD pair buyers amid a light calendar.
Technical analysis
GBP/USD not only needs to cross the immediate resistance line from late August, around 1.1365 by the press time, but should also cross the 50-DMA hurdle of 1.1466 and refresh the monthly peak of 1.1495 to convince buyers. Until then, the odds of witnessing a pullback toward the 21-DMA support near 1.1140 can’t be ruled out.
GBP/USD: Daily chart
Trend: Pullback expected