GBP/USD – Choppy as traders eye US and UK inflation reports

  • US inflation expected to fall to 3.3% for October
  • UK inflation expected to fall to 4.7% for October 
  • Bullish breakout ahead of key economic releases

It’s been a relatively uneventful start to the week but the next couple of days could be hugely important as the US and UK release inflation figures for October.

The two countries’ central banks have, alongside others, been grappling with very high inflation for the last couple of years, and efforts to bring it down are finally bearing fruit.

Inflation in the US is expected to have fallen to 3.3% last month which is within touching distance of the Fed’s 2% target. While the final push is expected to be the hardest, it will give the central bank some comfort that, despite the economy and labor market displaying remarkable resilience, a soft landing may still be possible.

Base effects are expected to turn much more favorable for the UK, where inflation is expected to have fallen from 6.7% in September to 4.7% in October. While that still leaves the BoE with a big job on its hands to more than half that again, it’s a huge step in the right direction.

Wage growth remains a major headwind for both but particularly the UK, which will also get the latest labor market statistics on Tuesday. Lower than-forecast readings on inflation and wages could put an end to rate hike talk and see traders bring forward expectations on when the first cut will come.

Market turning bullish ahead of key US and UK releases?

We’ve seen some interesting moves in GBPUSD recently that could be perceived as bullish ahead of the releases this week.


Source – OANDA on Trading View

After consolidating in October, the pair broke through the top of a triangle formation – the first potentially bullish signal – before rebounding lower. Over the last couple of sessions, it’s then rebounded again around the 61.8% Fibonacci retracement level – 26 October lows to 6 November highs – before edging higher again.

This could be viewed as a second bullish signal following a prolonged downtrend since July. Of course, a lot will hang on the data but this may at least suggest the market is becoming a little more bullish ahead of them.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam