UK inflation came in hotter than expected at 3.5% versus 3.3%, which raises the likelihood that the Bank of England could delay potential rate cuts. As we know, if inflation overshoots expectations while rate cuts are still on the table, it risks fueling inflation even further. So the market may now be thinking the BoE will hold off and possibly shift to a more hawkish tone.
That’s likely why Cable briefly reached new highs and even broke to fresh highs of the year before pulling back slightly. Now the question is whether that spike was part of an ending diagonal—or maybe just a leading diagonal—followed by an a-b-c retracement before more upside.
In either case, I think that given the spike to new highs, traders on an intraday basis, should be cautious and at least be aware of a potential three-wave pullback before any bullish continuation.
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