GBP/USD Forecast: UK inflation adds pressure on the pound

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3694

UK inflation unexpectedly shrank in February to 0.4% YoY.
Business activity in the UK improved in March, according to Markit.
GBP/USD struggles to hold above the 1.3700 level on dollar’s strength.

The GBP/USD pair bottomed this Wednesday at 1.3673 but managed to trim part of its intraday losses and finished the day just below the 1.3700 level. Another batch of discouraging UK data weighed on Pound, as the country published February inflation figures. The Consumer Price Index printed at 0.4% YoY, while the core reading came in at 0.9% below the 1.4% expected. The Retail Price Index resulted in 1.4% YoY vs the 1.6% expected. However, Markit PMIs were better than anticipated. The manufacturing index improved to 57.9, while the services one advanced to 56.8 in March, according to preliminary estimates.

This Thursday, Bank of England Governor Andrew Bailey is due to participate in a virtual panel discussion about central bank innovation at an online event hosted by the Bank for International Settlements.

GBP/USD short-term technical outlook

The 4-hour chart for GBP/USD shows that the 20 SMA has fallen sharply below the longer ones, but above the current price, maintaining the risk skewed to the downside. The Momentum indicator holds within negative levels. The RSI indicator recovered some ground but remains within oversold levels, without signs of bearish exhaustion.

Support levels: 1.3675 1.3640 1.3595

Resistance levels: 1.3730 1.3780 1.3825

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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