The Pound Sterling’s Position in the Market
- The Pound Sterling faces pressure against its major peers despite a faster-than-expected increase in UK inflation weighs on BoE rate cut bets for December.
- BoE’s Ramsden supports a less gradual easing approach as he is confident that the disinflation trend is intact.
- The Fed is expected to deliver fewer interest rate cuts ahead due to expectations of a high inflation outlook.
Despite a faster-than-expected increase in UK inflation, the Pound Sterling (GBP) is under pressure against most of its peers. Traders are skeptical about whether the Bank of England (BoE) will cut interest rates again in the December meeting. Market speculation for BoE rate cuts next month diminished after the release of the United Kingdom (UK) Consumer Price Index (CPI) data for October on Wednesday showed that price pressures accelerated faster than expected.
Key Highlights of UK Inflation Data
- UK’s headline inflation exceeded the bank’s 2% target.
- The core CPI, excluding volatile items, accelerated unexpectedly.
- Service inflation, closely tracked by BoE officials, grew at a faster pace of 5%.
The inflation data aligns with BoE Governor Andrew Bailey’s advice of adopting a gradual policy-easing approach, following the recent interest rate cut. However, BoE Deputy Governor Dave Ramsden expressed confidence in the economy’s normalization trend towards low and stable inflation, hinting at a potential less gradual rate-cut approach if disinflationary pressures intensify.
Upcoming Data to Watch
Investors await the Retail Sales data for October and flash S&P Global/CIPS Purchasing Managers Index (PMI) data for November, to be published on Friday, for further insights into the UK economy.
Daily Digest Marker Movers: Pound Sterling Weakens against US Dollar
- The Pound Sterling slides against the US Dollar (USD) as the US Dollar Index (DXY) rises, impacting investor sentiment.
- Traders adjust Fed rate cut bets for December based on expectations of President-elect Donald Trump’s policies driving inflation and growth, potentially influencing the Fed’s interest rate path.
- Fed policymakers hold varying views on the upcoming interest rate decisions, creating uncertainty in the market.
- US Initial Jobless Claims for the week ending November 15 come in lower than projected, indicating positive economic indicators.
Technical Analysis: Pound Sterling Seeks Support Near 1.2600
The Pound Sterling approaches a six-month low near 1.2600 against the US Dollar, signaling a bearish trend. The GBP/USD pair’s position below the 200-day Exponential Moving Average (EMA) at 1.2850 confirms this trend.
The 14-day Relative Strength Index (RSI) indicates strong bearish momentum within the 20.00-40.00 level.
Key Levels to Watch:
- Support: 1.2500
- Resistance: 200-day EMA