Pound drifting ahead of UK inflation

The British pound is steady in the Tuesday session. Currently, GDP/USD is trading at 1.3908, up 0.03% on the day.

UK Inflation Looms

The UK releases a host of inflation indicators on Wednesday (7:00 GMT). The highlight events are headline and Core CPI for January. Headline CPI rose to 0.6% in December and is projected to maintain this clip in January. Core CPI is projected to come in at 1.3%, down slightly from 1.4% in the previous release. These are lukewarm numbers, well below the Bank of England’s inflation target of 2 percent. With the UK still under lockdown due to Covid-19, it’s no surprise that inflation remains low.

At the same time, there is more talk of reflation in the US as the economy inevitably recovers, and we can expect a similar trend in the UK when the country reopens. An ING note stated that it expects headline inflation to rebound to the 2% level by the end of 2021, but will then drift lower in 2022, since it expects the spike in consumer spending to be limited. ING added that investors need not worry about the BoE resorting to negative interest rates, but it does not expect any tightening in policy prior to 2023.

Pound closing in on 1.40

It has been a productive February for the British pound, which is up 1.5% this month. On Tuesday, GBP/USD touched a high of 1.3951, its highest level since April 2018. Sterling has since retreated closer to the 1.39 line, but the currency appears has positive momentum and could make a run towards the 1.40 level, which has psychological significance. The 1.40 level was last breached in April 2018.

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GBP/USD Technical

 

  • GBP/USD is testing resistance at 1.3915. Above, there is resistance at 1.3985
  • There is support at 1.3734. Below, we find support at 1.3615
  • The 50-day MA (moving average) follows at 1.3605

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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