- GBP/USD has struggled to gather recovery momentum after UK inflation data.
- The pair could extend its slide toward 1.3530 in the near term.
- 10-year US Treasury bond yield continues to push higher toward 2%.
The British pound has failed to capitalize on the hot UK inflation data out on Wednesday and GBP/USD is consolidating Tuesday's losses near 1.3600. The unabated flight to safety and the broad-based dollar strength suggest that the pair is unlikely to stage a convincing rebound in the near term.
The UK's Office for National Statistics announced earlier in the day that the Consumer Price Index (CPI) climbed to 5.4% on a yearly basis in December from 5.1% in November. This print surpassed the market forecast of 5.2% but the Producer Price Index - Input (PPI) declined to 13.5% from 15.2% in the same period, not allowing GBP/USD to gain traction.
The benchmark 10-year US Treasury bond yield is already up more than 5% so far this week and continues to edge closer to the critical 2% mark. The market speculation of a possible 50 basis points rate hike in March is fueling the rally in yeilds that is boosting the greenback.
Anna Wong, Chief US Economist for Bloomberg Economics said on Wednesday that their in-house model of the Fed reaction function shows that a 50 bps March rate increase was warranted.
US stock index futures have recovered from daily lows and the UK's FTSE 100 Index trades flat in the early European session, pointing to a modest improvement in risk sentiment and limiting GBP/USD's downside for the time being.
GBP/USD Technical Analysis
GBP/USD needs to hold above 1.3600 (Fibonacci 23.6% retracement level of the one-month uptrend) and confirm it as support in order to shake off the bearish pressure.
Ideally, the Relative Strength Index (RSI) on the four-hour chart, which is currently floating around 40, would need to recover to 50 and hold there for buyers to show interest. 1.3640 (20-period SMA, 50-period SMA) aligns as the next hurdle.
On the downside, additional losses toward 1.3530 (Fibonacci 38.2% retracement) could be witnessed if a four-hour candle closes below 1.3570, where the 100-period SMA is located.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD resumes slide below 1.0500
EUR/USD gained modest upward traction ahead of Wall Street's opening but resumed its slide afterwards. The pair is under pressure in the American session and poised to close the week with losses near its weekly low at 1.0452.
GBP/USD nears 1.2600 as the US Dollar regains its poise
Disappointing macroeconomic data releases from the UK put pressure on the British Pound, yet financial markets are all about the US Dollar ahead of the weekly close. Demand for the Greenback increased in the American session, pushing GBP/USD towards 1.2600.
Gold pierces $2,660, upside remains capped
Gold (XAU/USD) puts pressure on daily lows and trades below $2,660 on Friday’s early American session. The US Dollar (USD) reclaims its leadership ahead of the weekly close, helped by rising US Treasury yields.
Broadcom is the newest trillion-dollar company Premium
Broadcom (AVGO) stock surged more than 21% on Friday morning after management estimated on Thursday’s earnings call that the market for customized AI accelerators might reach $90 billion in fiscal year 2027.
Can markets keep conquering record highs?
Equity markets are charging to new record highs, with the S&P 500 up 28% year-to-date and the NASDAQ Composite crossing the key 20,000 mark, up 34% this year. The rally is underpinned by a potent mix of drivers.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.