GBP/USD drops to one-year lows after US inflation, UK data

Sterling dropped below the 1.34 threshold against the greenback, the lowest level since December 2020 as the USD was bid after the latest US inflation data, but the GBP struggled following dismal domestic economic numbers.

Earlier in the day, the UK GDP for the third quarter declined to 6.6% annualized, down from 23.6% in the second quarter and weaker than the 6.8% forecast by economists. The quarterly GDP change slowed to 1.3% from 5.5% in Q2.

Additionally, industrial production for September fell to -0.4% from 0.8%, and manufacturing production slowed to just 0.1%, down from 0.5% lastly. Traders sold the Pound after the numbers.

Yesterday, a massive spike in volatility occurred after the US inflation data came out way hotter than expectations. 

The US Consumer Price Index (CPI) rose 6.2% from a year ago, the most since 1990. The monthly gauge increased by 0.9%. At the same time, the core inflation, which excludes volatile food and energy prices, jumped 4.6% yearly, also the most in 30 years. 

The monthly change came out at  0.6%. As previously mentioned, the greenback rocketed higher as traders are now betting the Fed will increase rates two times in 2022.

As long as the GBP trades below 1.34, the short-term outlook seems bearish, targeting the 1.32 level. Only a jump beyond 1.36 would likely cancel the current bearish pressure.