• GBP/USD holds lower grounds after a volatile day that ended on a negative note.
  • UK’s 40-year high inflation propelled recession woes, yields.
  • Hopes of BOE’s aggression fail to impress buyers.
  • Second-tier US data can entertain traders ahead of UK Retail Sales for July.

GBP/USD bears flex muscles around 1.0250, after retaking control following a brief bounce after the Fed Minutes. The cable pair’s inaction could be attributed to the lack of major data/events during Thursday’s initial Asian session. It’s worth noting that the quote poked weekly top after the UK inflation data but failed to remain firmer amid fears that higher price pressure could lead to recession.

The Federal Open Market Committee (FOMC) meeting Minutes mentioned that the policymakers strongly supported the 75 bps rate increase in August while seeing a slowing pace of hikes at some point. The Minutes also signaled that Fed officials saw the hazard the Fed could tighten more than necessary.

On the other hand, fears of economic slowdown escalated after the UK inflation jumped to a 40-year high. The economic concerns fuelled the rush towards risk safety, which in turn fuelled the UK 2-year Treasury yields to the highest since October 2008.

It should be noted that the firmer inflation also pushes the Bank of England (BOE) towards faster rate hikes but the market’s lack of confidence over the “Old Lady”, as it is informally called, seem to exert downside pressure on the GBP/USD prices. “The potential loss of independence by the BoE could also hurt sterling with Foreign Secretary Liz Truss, the poll leader in the Tory leadership contest promising to review the BoE's remit,” said Reuters.

That said, UK Consumer Price Index (CPI) rose to 10.1% YoY in July versus 9.8% expected and 9.4% previous readings while the Core CPI, which excludes volatile food and energy items, rose to 6.2% versus 5.9% market consensus and 5.8% previous readouts.

Elsewhere, US Retail Sales flashed 0.0% growth during July, versus 0.1% expected and a downwardly revised 0.8% prior. The Retail Sales Control Group figures, however, rose to 0.8% compared to 0.6% market consensus and 0.7% prior (revised from 0.8%).

The firmer US data and the Fed Minutes’ inability to please bears seem to have helped Federal Reserve Governor Michelle Bowman to mention, per Reuters, “High inflation and strong employment will likely create some pressure on labor and employment.”

Amid these plays, the US 10-year Treasury yields rose the most in a week while refreshing the monthly high near 2.90%, which weighed on the Wall Street benchmarks and helped the US dollar reverse the fall marked after the Federal Open Market Committee (FOMC) meeting minutes.

Given the fears of economic slowdown in the UK, GBP/USD is likely to remain pressured ahead of Friday’s Retail Sales for July, the key component of the British Gross Domestic Product (GDP), expected -3.3% YoY versus -5.8% prior.

Technical analysis

GBP/USD remains on the way to June’s low around 1.1930 unless crossing a two-month-old downward sloping resistance line, at 1.2260 at the press time. It’s worth noting that the 21-DMA and 100-DMA, respectively near 1.2110 and 1.2385, are extra filters to the north.

Additional important levels

Overview
Today last price 1.2045
Today Daily Change -0.0049
Today Daily Change % -0.41%
Today daily open 1.2094
 
Trends
Daily SMA20 1.2109
Daily SMA50 1.2119
Daily SMA100 1.2405
Daily SMA200 1.2898
 
Levels
Previous Daily High 1.2118
Previous Daily Low 1.2008
Previous Weekly High 1.2277
Previous Weekly Low 1.2048
Previous Monthly High 1.2246
Previous Monthly Low 1.176
Daily Fibonacci 38.2% 1.2076
Daily Fibonacci 61.8% 1.205
Daily Pivot Point S1 1.2029
Daily Pivot Point S2 1.1963
Daily Pivot Point S3 1.1919
Daily Pivot Point R1 1.2139
Daily Pivot Point R2 1.2183
Daily Pivot Point R3 1.2249

 

 

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