GBP/USD – British pound ticks higher, U.S. inflation disappoints

GBP/USD is subdued in the Wednesday session. Currently, GBP/USD is trading at 1.2737, up 0.10% on the day. On the release front, U.S. inflation numbers for May were soft. CPI slowed to 0.1%, down from 0.3% in the previous release. This matched the estimate. The core reading posted a gain of 0.1% for a fourth straight month, shy of the forecast of 0.2%. There are no major British events. On Thursday, the U.S. releases unemployment claims.

The pound climbed sharply last week, as rate comments from the Federal Reserve sent the U.S. dollar broadly lower. Fed chair Jerome Powell and FOMC member James Bullard both hinted at a rate cut later in the year, surprising the markets with their dovish stance. Since raising rates in December, the Fed has been neutral with regard to the direction of the next rate move, but rising trade tensions have raised fears of a slowdown in the U.S. economy. This has prompted the Fed to reconsider a rate cut later this year. The CME Group has projected a 66% likelihood for a rate cut at the July meeting, up sharply from a month ago, when the odds of a July cut were just 16%. With the May inflation numbers remaining low, there could be more pressure on the Fed to lower interest rates in order to boost economic activity and inflation.

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GBP/USD Fundamentals

Wednesday (June 12)

• 8:30 US CPI. Estimate 0.1%. Actual 0.1%

• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%

• 10:30 US Crude Oil Inventories. Estimate -1.0M

• 13:01 US 10-year Bond Auction

• 14:00 US Federal Budget Balance. Estimate -199.2B

• 19:01 British RICS House Price Balance. Estimate -21%

Thursday (June 13)

• 8:30 US Unemployment Claims.  Estimate 215K

Open: 1.2724 High: 1.2759 Low: 1.2715 Close: 1.2737

GBP/USD Technical

GBP/USD was flat for most of the Asian session. The pair posted slight gains in the European session and has ticked lower in North American trade

• 1.2723 was tested in support earlier on Wednesday. It is a weak line

• 1.2841 is the next resistance line

• Current range: 1.2723 to 1.2841

Further levels in both directions:

• Below: 1.2723, 1.2615, 1.2477 and 1.2401

• Above: 1.2841, 1.2910 and 1.3000