GBPUSD sees intraday buying in response to better UK inflation figures.
During the first part of the European session, the GBPUSD pair fades an intraday bullish rise to the 1.2470 zone. And retreats to the lower end of its daily trading range. The pair is now trading at 1.2420 and is vulnerable to extending its recent retracement decline seen over the last two weeks or so.
Expectations for fewer rate rises by the Bank of England limit any additional gains amid a strong USD.
The British Pound (GBP) received a modest boost as a result of the revelation of stronger-than-expected UK inflation numbers. Albeit the intraday rally has peaked. Quite rapidly. According to the Office for National Statistics, the headline UK CPI grew 8.7% year on year in April, compared to consensus predictions of 8.2%. This, however, is a significant slowdown from the 10.1% YoY rate recorded in March. Supporting views that the Bank of England (BoE) will need to raise interest rates less often in the coming months to drive inflation down.
This, together with the underlying positive attitude around the US Dollar (USD), leads to the GBPUSD pair’s upside being limited.
Investors are now looking to the FOMC meeting minutes for new guidance.
In fact, the USD Index (DXY), which measures the value of the US dollar against a basket of currencies, is nearing a two-month high reached. On Tuesday and continues to benefit from the likelihood of future Fed rate rises. Federal Reserve (Fed). The idea was reinforced by recent hawkish statements by numerous Fed members. Who suggested that the US central bank will hold interest rates higher for a longer period of time.
Aside from that, a lower risk tone – amid concerns about the weakening global economy and the US debt ceiling – advantages the Greenback’s relative safe-haven reputation even more. As a result, some sellers have gathered around the GBPUSD pair. While the downside remains cushioned ahead of the release of the FOMC minutes.
Investors will be looking for new indications regarding the Fed’s rate-hike path. Which will have a significant impact on the near-term USD price dynamics and offer a new directional push to the GBPUSD pair. Nonetheless, the aforementioned fundamental backdrop appears to be stacked against bearish traders. And implies. The path of least resistance for spot prices is downward.
Even from a technical standpoint. The overnight breach below the 50-day Simple Moving Average (SMA) suggests that the decline from a one-year high reached earlier this month may be extended.
