Buyers Unimpressed Despite Upbeat UK CPI
- Britain’s inflation rate decreased by a smaller margin than anticipated last month.
- British consumer prices rose 8.7% annually, down from 10.1% in March.
- High inflation increases the likelihood of additional BOE interest rate hikes.
Today’s GBP/USD forecast is slightly bullish. The pound initially strengthened and later weakened after releasing stronger-than-expected British inflation data. Official data revealed that Britain’s persistently high inflation rate decreased by a smaller margin than anticipated last month.
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At the same time, an important measure of core price increases surged to its highest level in 31 years. These findings increase the likelihood of additional interest rate hikes.
In April, consumer prices experienced an 8.7% increase annually, down from 10.1% in March. However, this still places Britain with the highest inflation rate among the advanced economies of the Group of Seven, alongside Italy.
Consequently, British government bond prices plunged as investors increasingly bet on the BoE being compelled to raise interest rates multiple times until the year’s end.
Economists surveyed by Reuters had predicted that the headline CPI annual rate would decrease to 8.2% in April, moving further away from the 41-year high of 11.1% recorded in October.
Earlier in May, the Bank of England had forecasted an inflation rate of 8.4% for April. Governor Andrew Bailey and other senior BoE officials have faced growing criticism for the inflation surge. During a parliamentary hearing on Tuesday, one lawmaker accused central banks of a “woeful neglect of duty.”
GBP/USD key events today
After the UK inflation report, the focus now shifts to the Fed meeting minutes, which will come out later in the day. The minutes will give a clear picture of the last Fed policy meeting and what might come in the future.
GBP/USD technical forecast: Another attempt to break below 1.2401.
The bias for the pound on the 4-hour chart is bearish. However, for a moment, bulls punctured the 30-SMA resistance. The bears managed to pull the price back below the SMA, taking back control. The RSI, which shows momentum, is currently below 50 supporting bears.
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Despite this strong bearish momentum, the price might pause at the 1.2401 support level. This is because this level has stopped bears before. But if they eventually break below, the price will fall to 1.2350 support.
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