GBP/USD grinds toward 1.2200 ahead of UK inflation, US Retail Sales


  • GBP/USD remains sidelined after a volatile day, grinds higher of late.
  • Mostly upbeat UK jobs report, hopes of British government-labor deal underpin bullish bias for the Cable.
  • Unimpressive US inflation, retreat in Treasury bond yields add to the upside expectations.
  • UK CPI for February eyed for intraday directions; US data appears important too.

GBP/USD portrays the pre-data anxiety by treading water around 1.2180 during early Wednesday.

The Cable pair rose to the two-week high the previous day before reversing from 1.2270 as the US inflation propelled market moves. Even so, upbeat UK employment data joined hopes of overcoming the British workers’ strikes seemed to have put a floor under the GBP/USD prices.

Late Tuesday, the Financial Times (FT) quoted officials familiar with the matter to mention that UK Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt are mulling giving NHS staff and other key workers a lump sum payment by backdating next year's pay award, which takes effect from April, likely to the start of January 2023.

Before that, the UK Office for National Statistics (ONS) released mixed employment numbers with an unchanged ILO Unemployment Rate of 3.7% for three months to December, contrasting with a decline in the Claimant Count Change, to -12.9K versus -3.2K prior. The details suggested an increase in Average Earnings, Excluding Bonuses and several payrolled employees, versus a fall in the UK vacancies. The mixed data, however, managed to help the British Pound (GBP) on release.

On the other hand, the US Consumer Price Index (CPI) rose past market expectations to 6.4% YoY but posted the slowest increase since 2021 while easing below 6.5% prior. Following the data, Dallas Fed President Lorie Logan stated that they must remain prepared to continue rate increases for longer than previously anticipated. On the same line was New York Fed President John Williams, who noted that the work to control too high inflation is not yet done. Additionally, Philadelphia Fed President Patrick Harker signaled that they are not done (with lifting rates), but they are likely close.

Against this backdrop, US 10-year Treasury bond yields seesaw around 3.75% after rising three basis points (bps) to refresh a six-week high, whereas the two-year counterpart jumped to the highest level since early November 2022 by poking 4.62%, around 4.61% at the latest. Further, S&P 500 Futures trace Wall Street’s downbeat closing to highlight the mildly offbeat mood.

Looking forward, the UK CPI for January, expected to ease to 10.3% YoY versus 10.5% prior, becomes crucial for the GBP/USD traders amid hopes that the Bank of England (BoE) has limited scope for further rate hikes. Following that, US Retail Sales and Industrial Production details for January and NY Empire State Manufacturing Index for February should be watched closely for clear directions.

Also read: UK Inflation Preview: Will softer CPI raise odds of a BoE pause?

Technical analysis

A successful break of the 50-DMA, around 1.2190 by the press time, becomes necessary for the GBP/USD buyers to keep the reins.

Additional important levels

Overview
Today last price 1.2174
Today Daily Change -0.0003
Today Daily Change % -0.02%
Today daily open 1.2177
 
Trends
Daily SMA20 1.2249
Daily SMA50 1.2186
Daily SMA100 1.1874
Daily SMA200 1.1943
 
Levels
Previous Daily High 1.227
Previous Daily Low 1.2118
Previous Weekly High 1.2194
Previous Weekly Low 1.1961
Previous Monthly High 1.2448
Previous Monthly Low 1.1841
Daily Fibonacci 38.2% 1.2212
Daily Fibonacci 61.8% 1.2176
Daily Pivot Point S1 1.2107
Daily Pivot Point S2 1.2036
Daily Pivot Point S3 1.1954
Daily Pivot Point R1 1.2259
Daily Pivot Point R2 1.234
Daily Pivot Point R3 1.2411

 

 

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