GBP/USD Faces First Actual Check Forward of US CPI Knowledge

GBP/USD Speaking Factors and Evaluation:

  • UK PM Boris Johnson underneath stress amid studies of extra lockdown events
  • US CPI, Fed speeches and UK GDP kind a part of main threat occasions this week
  • GBP/USD bull run coming underneath menace forward of purple scorching US inflation information print

Investigation into UK PM Boris Johnson’s Lockdown Occasion Heats up

Stories out of Britain counsel that as many as 100 staffers have been invited to a “carry your individual 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 celebration suffered a stunning defeat within the by-election for the North Shropshire area – historically a stronghold for the Conservative celebration – which Johnson took full accountability for. As extra info turns into accessible, it’s prone to weigh additional on the Pound as rising discontent opens the door to PM successor talks.

Key Danger Occasions within the Week Forward

After a somewhat 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 information for November in addition to US retail gross sales and the College of Michigan’s shopper sentiment preliminary information 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 longer term path of financial coverage. Whereas the hawkish pivot from throughout the Fed takes form, markets might look to the forecast variety of 7% as affirmation that the Fed will go away no stone unturned in relation to reigning in inflation however any official response will should be noticed.

economic calendar

Supply: DailyFX economic calendar

GBP/USD Key Technical Ranges

Sterling continues its spectacular efficiency in opposition to the greenback however now faces an vital take a look at of trendline resistance (drawn from the 2021 excessive). Whereas the RSI flirts just under overbought territory, there are many threat occasions over the subsequent week that that would add to GBP/USD volatility.

Waiting for tomorrow’s US CPI information, it appears extra doubtless {that a} scorching inflation print sends the greenback greater as expectations of a number of price hikes develop into additional entrenched. In consequence, we might even see a pullback within the pair round resistance, barring a shock within the precise information to the draw back. US CPI is forecast to achieve 7%, the best it has been in almost 40 years.

GBP/USD Day by day Chart

GBP/USD daily chart

Chart ready by Richard Snow, IG

A minor retracement may see 1.3515 as the subsequent degree 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 short lived drop within the crowded greenback, presumably leading to a GBP/USD bullish continuation in direction of 1.3675

— Written by Richard Snow for DailyFX.com

Contact and comply with Richard on Twitter: @RichardSnowFX

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