GBP/USD spikes higher as the US dollar sells off in a massive turnaround


  • The GBP/USD has staged a rapid turnaround rising to a new weekly high.
  • The primary driver is a weaker dollar, a significant shift after the initial response to the inflation report.

The GBP/USD is up some 50 pips on the day after trading lower beforehand. The pair reached a high of 1.3972, staging a quick recovery after falling earlier to 1.3800.

The US dollar initially rallied as the US inflation report came out above expectations. Core CPI beat projections by rising by 1.8% y/y against 1.7% that was expected. Other inflation data came also came out above estimates. The specter of a faster pace of rate rises sent the US dollar higher against most currencies. This fear also weighed on stocks.

However, when shares trading began on Wall Street, the drops were not very significant. Stocks turned around and are now trading higher. The VIX volatility index also slipped, indicator calmer trade. The better atmosphere resulted in a sell-off of the US dollar.

GBP/USD Technical picture

The GBP/USD is now trading at the highest levels of the week. The 1.3980 seen when the pair last traded at these levels caps the pair ahead of the round 1.40 level. Further above, 1.4060 was the peak after the BOE.

Looking down, 1.3920 was a double-top earlier in the week and now switches to support. 1.3845 provided limited support and is a notable line. The round number of 1.38 was the low of the day.

The RSI on the 30-minute chart is positive but nears overbought levels. On the other hand, momentum is still robust. 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Editors’ Picks

AUD/USD rises above 50-HMA, bull reversal in the making?

The sell-off in AUD/USD seems to have run out of steam, courtesy easing RBA rate cut expectations after upbeat Australian CPI data. The pair trades above the 50-hour average. A close above 0.6765 would confirm a bullish reversal candlestick pattern on the daily chart. 

AUD/USD News

USD/JPY fills Monday's bearish gap ahead of Fed interest rate

USD/JPY has filled the gap created by Monday's negative open. Coronavirus fears have subsided in the last 24 hours, allowing recovery in USD/JPY. The respite could be short-lived if the Fed sounds dovish, sending the US dollar lower. 

USD/JPY News

Federal interest rate preview: Stable policy and an uncertain future

The course of the American economy has not altered since the previous FOMC meeting on Dec last year. 4Q growth is expected to be 2.1% when the preliminary figures are released by the Bureau of Economic Analysis on Thursday.

Read more

Gold: Bulls looking for a discount in $1560s

Gold top in the making with a weekly shooting star and weekly divergence. The price of gold has been found floundering between 1580 and the 1560s following a surge at the start of the year to the highest levels since March 2013 at $1,611.

Gold News

GBP/USD: 1.3080 questions break of short-term falling trendline

GBP/USD trades near 1.3025 during the early Wednesday’s trading session. The pair recently broke a three-day-old falling trend line but is still to cross the near-term key resistance confluence.

GBP/USD News

Forex MAJORS

Cryptocurrencies

Signatures