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GBPUSD rallies to multi-month highs, eyeing 1.1800

  • The GBP extended its gains towards 1.1790s after a soft US inflation report.
  • The US Dollar plunges sharply, as shown by the US Dollar Index, down 1.20%, below the 107.000 mark.
  • Consumer sentiment in the United States worsened as inflation expectations rose.

The Pound Sterling rises in the North American session, following a softer inflation report in the United States, which augmented speculations that the Federal Reserve might lift rates at a slower pace. Also, China’s Covid-19 restrictions were relaxed, a sign that could bolster the world’s second-largest economy. At the time of writing, the GBPUSD is trading at 1.1795., above its opening price by 0.65%.

Wall Street’s cling to Thursday gains, a reflection of an upbeat sentiment. The University of Michigan’s (UoM) Consumer Sentiment for November fell to a four-month low, from 59.5 to 54.7, while inflation expectations rose. Americans expected inflation in one-year would rise to 5.1%, and for five to 10 years, consumers foresee inflation peaking at 3%. Joanne Hsu, director of the survey, said, “Continued uncertainty over inflation expectations suggests that such entrenchment in the future is still possible.”

Aside from this, the latest US Consumer Price Index (CPI) report is still weighing on the US Dollar (USD), as headline CPI and core CPI for October fell below expectations. Therefore, speculations that the Federal Reserve would lift rates in smaller sizes increased. Reflection of that is the Fed CMEWatchTool showing traders expecting the Fed to hike rates by 50 bps in its December meeting, as chances lie at 85.4%, unchanged from Thursday.

Elsewhere, a slew of Federal Reserve officials commented that it was “appropriate” to slow the pace of interest-rate hikes. Nevertheless, most of them commented that the Fed is still tightening monetary policy, as the Dallas Fed President Lorie Logan said that “a slower pace should not be taken to represent easier policy.”

In the meantime, the US Dollar Index, a gauge of the buck’s value against a basket of peers, plunges more than 1%, below the 107.000 mark, for the first time since August 18, a tailwind for the GBPUSD.

Aside from this, on the UK front, the Gross Domestic Product (GDP) for Q3 shrank more than foreseen in September, indicating the beginning of a prolonged projected recession by the Bank of England (BoE). UK GDP fell 0.6% between August and September, more than the 0.4% contraction estimates by analysts.

The latest data would provide a rugged backdrop to the newest Chancellor, Jeremy Hunt, who is expected to tighten fiscal policy as the UK battles 40-year high inflationary pressures. Rishi Sunak’s budget is considering tax rises and cutting public spending up to GBP 55 Billion a year.

Of late, crossing newswires, the US Treasury Secretary and former Federal Reserve Chair Janet Yellen said October’s inflation reading was positive. Still, she cautioned that core CPI was lower, but shelter prices remain high.

GBPUSD Key Technical Levels

GBP/USD

Overview
Today last price1.1794
Today Daily Change0.0080
Today Daily Change %0.68
Today daily open1.1714
 
Trends
Daily SMA201.1407
Daily SMA501.1331
Daily SMA1001.1665
Daily SMA2001.2275
 
Levels
Previous Daily High1.1715
Previous Daily Low1.1348
Previous Weekly High1.1614
Previous Weekly Low1.1147
Previous Monthly High1.1646
Previous Monthly Low1.0924
Daily Fibonacci 38.2%1.1575
Daily Fibonacci 61.8%1.1488
Daily Pivot Point S11.147
Daily Pivot Point S21.1225
Daily Pivot Point S31.1102
Daily Pivot Point R11.1837
Daily Pivot Point R21.196
Daily Pivot Point R31.2205

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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