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GBP/USD slides amid US inflation concerns, mixed UK economic outlook

  • GBP/USD drops more than 0.50%, reacting to US data indicating ongoing inflation struggles and a cooling job market.
  • US University of Michigan report shows increased short-term inflation expectations, while consumer sentiment dips below expectations.
  • UK's Autumn Statement focuses on debt reduction and inflation control, with modest GDP growth projections, weighed on the Pound Sterling.

The GBP/USD tumbles during the mid-North American session after economic data from the United States (US) suggested the battle against inflation is not done while the economy continues to decelerate, as sought by the US Federal Reserve (Fed). At the time of writing, the pair is trading at 1.2456, losing 0.63%.

Sterling falls as US inflation expectations rise and UK Chancellor's Autumn Statement reveals cautious growth projections

A report by the University of Michigan (UoM) witnessed that inflation expectations in the US rose for one year to 4.5% from 4.4% in the previous report, while it stood at 3.2% for a five-year period. Regarding consumer sentiment, Americans remain pessimistic as the index dropped from 63.8 to 61.3 but exceeded forecasts.

Additional data from the US showed that unemployment claims fell last week compared to two weeks ago, suggesting the jobs market is cooling. At the same time, the US Census Bureau showed that Durable Goods Orders plummeted as demand for business equipment slowed.

The US Dollar Index (DXY), which tracks the performance of six currencies vs. the Greenback, rose sharply by 0.49% and sits at 104.10, underpinned by higher US Treasury bond yields, as a reaction to the UoM inflation expectations poll.

Across the pond, Jeremy Hunt, the UK Chancellor of the Exchequer, revealed its Autumn Statement. He stated, “We will reduce debt, cut taxes, and reward work.” He emphasized that it would work alongside the Bank of England to get inflation to its 2% target, which, according to the Office for Budget Responsibility (OBR) would be attained in 2025.

The Office for Budget Responsibility (OBR) says the combined impact of these measures will reduce inflation and raise GDP. Nevertheless, Hunt added that Gross Domestic Product (GDP) is expected to grow by merely 0.7%, compared with the 1.8% forecast in the previous projection in March from the OBR.

GBP/USD Price Analysis: Technical outlook

The GBP/USD remains bullish according to the daily chart, though is about to test key support seen at the 200-day moving average (DMA) at 1.2448, which once cleared, could open the door for further losses. The next support would be the 1.2400 figure, followed by the November 17, the latest cycle low at 1.2374. A decisive break would put into play the 50-DMA at 1.2256. On the flip side, if buyers reclaim 1.2500, they could remain hopeful of higher prices, with the first resistance level at 1.2559, the November 21 high.

GBP/USD

Overview
Today last price1.2461
Today Daily Change-0.0075
Today Daily Change %-0.60
Today daily open1.2536
 
Trends
Daily SMA201.2294
Daily SMA501.2257
Daily SMA1001.2505
Daily SMA2001.2448
 
Levels
Previous Daily High1.2559
Previous Daily Low1.2501
Previous Weekly High1.2506
Previous Weekly Low1.2213
Previous Monthly High1.2337
Previous Monthly Low1.2037
Daily Fibonacci 38.2%1.2537
Daily Fibonacci 61.8%1.2523
Daily Pivot Point S11.2505
Daily Pivot Point S21.2474
Daily Pivot Point S31.2446
Daily Pivot Point R11.2563
Daily Pivot Point R21.2591
Daily Pivot Point R31.2622

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.

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