GBPUSD has retreated to the 1.2450 area after reaching a new daily high above 1.2470 in the early European morning on Wednesday. Although the UK’s strong inflation data helps Pound Sterling remain resilient against its major rivals. The negative shift in risk sentiment may make it difficult for GBPUSD to gain bullish momentum.
The Office for National Statistics (ONS) in the United Kingdom announced on Wednesday that the annual Consumer Price Index (CPI) fell to 10.1% in March from 10.4% in February. This reading was higher than the market’s prediction of 9.8%.
Furthermore, the Core CPI remained stable at 6.2% year on year. While the annual Retail Price Index fell slightly lower to 13.5%, compared to the market expectation of 13.3%.
According to Reuters, markets have fully priced in a 25-basis point (bps) rate increase by the Bank of England in May.
Risk aversion may support the US dollar while weighing on the pair.
Midweek GBPUSD risk sentiment appears to be harmed by hot inflation data. FTSE 100 Index in the United Kingdom was down nearly 0.5%. And US stock index futures were down between 0.4% and 0.6%.
In the absence of high-tier macroeconomic data from the United States. The US Dollar may continue to strengthen if safe-haven flows dominate market action in the afternoon.
The Federal Reserve’s (Fed) Beige Book will be closely watched by market participants in the late American session. Nonetheless, this publication is unlikely to alter the fact that markets widely anticipate the Fed to choose at the next meeting. There will be another 25-basis point increase.
GBPUSD Technical Analysis
The technical picture shows that the pair is struggling to gain bullish momentum. On the four-hour chart, Pound sterling is trading above the 20- and 50-period Simple Moving Averages (SMA).
The pair, however, lost traction after encountering resistance at 1.2470, the lower limit of the ascending regression channel.
If the pair rises above 1.2470 and begins to use it as support, it may move higher towards 1.2500 (psychological level, static level) and 1.2550. (mid-point of the ascending channel).
On the downside, first support is at 1.2430/1.2420 (20-period SMA, 50-period SMA, 100-period SMA), followed by 1.2400 (psychological level, static level) and 1.2370 (Fibonacci 23.6% retracement of the most recent uptrend).
