GBP/USD steady around 1.3650 amid a mixed market sentiment
- GBP/USD climbs around this week’s tops 1.3670’s area, on broad US dollar selling pressure.
- Inflationary pressures threaten to derail the economic recovery.
- UK GDP for August increased by 6.9%, better than expected.
- US CPI rose to 5.4%, the highest gain since 2008.
During the New York session, the British pound advances almost half percent, trading at 1.3651 at the time of writing. The market sentiment is mixed, as US equity indexes seesaw between gains and losses.
Higher US inflation September reading than estimated, coupled with slower growth, threatens to derail the economic recovery. Furthermore, an ongoing energy crunch in Asia and Europe spurred the perception in consumers that companies with higher electricity prices could pass on those costs to them without harming the business.
US Consumer Price Index at higher readings since 2008, overshadowed the UK GDP figure
The UK economic docket featured the Gross Domestic Product for August annually, which rose by 6.9%, two ticks higher than the 6.7% estimated by economists. Despite being a positive figure, investors’ focus was on the United States Consumer Price Index. The GBP/USD barely blinked on the news.
Meanwhile, on the US front, the Consumer Price Index rose by 5.4%, more than the 5.3% YoY reading expected by analysts. The reading is the highest annual gain since 2008. The Core Consumer Price Index, which excludes food and energy, increases by 4% annually, according to estimations. The GBP/USD initial reaction was to the downside, reaching 1.3587, but bounced off the lows and printed a daily high around 1.3646, at the time being.
GBP/USD Price Forecast: Technical outlook
Daily chart
The GBP/USD is approaching the top of the week around 1.3670’s area. However, the daily moving averages (DMA’s) are still above the spot price, maintaining the downtrend on the pair. Also, the momentum indicator like the Relative Strenght Index (RSI) at 49 broke below the 50-midline, suggesting that downward pressure is mounting on the GBP/USD pair.
Failure to break above the 1.3700 figure could tumble the pair towards 1.3411, but it would find some hurdles on the way down. The first support level would be the October 12 low at 1.3567, followed by the September 28 low at 1.3520, and then the September 29 low at 1.3411.
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Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
