|

GBP/USD plummets down to 1.3420 post-US CPI figures, amid increasing Brexit tensions

  • The British pound collapses, down 160 pips during the day on high US inflation.
  • US CPI increased the most in 30 years, topping 6.2%.
  • Brexit: UK and EU look far from reaching a post-Brexit deal on Northern Ireland.

The British pound reverses this week’s gains and some more, plummeting 160 pips during the day, down almost 1%, trading at 1.3426 at the time of writing. Since the beginning of the week, the GBP/USD pair trimmed last Friday’s losses, bouncing from 1.3400 to this week’s high (November 9) at 1.3606, amid the lack of a catalyst, mainly driven by US dollar weakness. Also, lower US bond yields dragged the greenback lower, ahead of the critical US CPI release.

US CPI increased the most in 30 years, topping 6.2%

On Wednesday, the Labour Department reported that the US Consumer Price Index for October rose by 6.2%, on a yearly basis, higher than the 5.3% expected by analysts. Further, the Core CPI that excludes energy and food volatile items increased by 4.6% for the same period, more than the 4.3% foreseen by market participants. 

According to the report, prices in energy, shelter, food, and vehicles triggered the spike in the CPI. Also, inflation is broadening beyond areas associated with a reopening.

That said, USD bulls gained traction, spurring a 160 pip drop in the GBP/USD pair, overcoming intraday support levels like the November 9 low at 1.3523, followed by the November 8 low at 1.3490, and then the  S3 pivot level at 1.3433.

Additionally, in the last hour or so, Brexit woes hit the wires, as the UK and the EU look far from reaching a post-Brexit agreement over Northern Ireland.

“EU governments agreed on the need for “robust” action against Britain if London follows through on its threat to invoke emergency unilateral provisions,” per Reuters.

According to sources cited by Reuters, “Downside risk may emerge for the pound in the coming days as it looks increasingly likely that the UK will unilaterally suspend parts of the Northern Ireland Protocol.”

That said, GBP/USD traders should note that if the UK triggers Article 16, the British pound could potentially sell-off because the Euro Zone would not stand still instead would retaliate against the UK.

GBP/USD TECHNICAL SUPPORT/RESISTANCE LEVELS

Overview
Today last price1.3431
Today Daily Change-0.0128
Today Daily Change %-0.94
Today daily open1.3559
 
Trends
Daily SMA201.369
Daily SMA501.3693
Daily SMA1001.3754
Daily SMA2001.3848
 
Levels
Previous Daily High1.3607
Previous Daily Low1.3524
Previous Weekly High1.3698
Previous Weekly Low1.3424
Previous Monthly High1.3834
Previous Monthly Low1.3434
Daily Fibonacci 38.2%1.3556
Daily Fibonacci 61.8%1.3576
Daily Pivot Point S11.352
Daily Pivot Point S21.3481
Daily Pivot Point S31.3437
Daily Pivot Point R11.3603
Daily Pivot Point R21.3647
Daily Pivot Point R31.3686

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10
Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.
 Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?
Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.