Pound Sterling remains on the back foot against USD, moves little after UK CPI report

GBP/USD meets with a fresh supply after failing to make it through the 200-day SMA.
Geopolitical uncertainties and inflation fears underpin the USD, weighing on the pair.
The UK CPI comes in line with market expectations and does little to influence the GBP.

Haresh Menghani FXStreet

The GBP/USD pair once again faces rejection near a technically significant 200-day Simple Moving Average (SMA) and turns lower for the second consecutive day on Wednesday. Spot prices stick to modest intraday losses below the 1.3400 mark through the early European session and react little to the latest UK consumer inflation figures.

The UK Office for National Statistics (ONS) reported that the headline Consumer Price Index (CPI) rose 3.0% over the year in February, matching the previous month's reading and consensus estimates. However,, the core CPI, which excludes volatile food and energy items, came in above the forecast and climbed 3.2% YoY from 3.1% in January. The data validates the Bank of England's (BoE) hawkish outlook, though fails to provide any impetus to the British Pound (GBP) or the GBP/USD pair amid the emergence of some US Dollar (USD) buying.

Despite reports that diplomatic efforts are underway to establish a one-month ceasefire mechanism between the US and Iran, the conflict, so far, has shown no signs of easing. In fact, Israel continues with its strikes on the Islamic Republic, while the Trump administration has directed thousands of soldiers from the US Army's elite 82nd Airborne Division to the Middle East. This keeps geopolitical risks in play, which, in turn, supports the safe-haven buck amid emerging bets for rate hikes by the Federal Reserve (Fed) and weighs on the GBP/USD pair.

Meanwhile, the UK central bank last week signaled the potential rate hike as early as April amid inflation fears stemming from the Iran war. This might hold back traders from placing aggressive bearish bets around the GBP, warranting some caution before positioning for any further depreciating move for the GBP/USD pair. That said, a sustained move and acceptance above the 200-day SMA, around the 1.3430-1.3435 region, is needed to confirm a bullish outlook.

(The story was corrected on March 25 at 08:50 GMT to say that the Core UK CPI came in above the forecast of 3.1%, not in line with expectations.)

Economic Indicator

Core Consumer Price Index (YoY)

The United Kingdom (UK) Core Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. The YoY reading compares prices in the reference month to a year earlier. Core CPI excludes the volatile components of food, energy, alcohol and tobacco. The Core CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD eases from tops, retests 1.3630

GBP/USD clings to its daily gains, although it gives away some gains and recedes toward the 1.3630 region on Thursday. Cable’s uptick comes despite the bounce in the Greenback, which manages to regain some balance in the wake of Wednesday’s deep pullback.

EUR/USD turns negative near 1.1670

EUR/USD now trades with modest losses around 1.1670, coming all the way down from earlier tops beyond 1.1700 the figure. The pair’s decline follows the acceptable rebound in the US Dollar as market participants continue to closely follow developments from the US money market.

Gold comes under pressure below $4,500

Gold faces some correction and slips back below the key $4,500 mark per troy ounce on Thursday. The precious metal’s daily decline comes amid the slightly improvement in the US Dollar and rising US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP extend gains as ETFs inflows and improved sentiment boost outlook

Cryptocurrency prices are extending gains on Thursday, led by Bitcoin’s (BTC) climb above $70,000. Ethereum (ETH) remains bullish, trading above $2,200, while Ripple (XRP) has recovered above $1.15 as bulls tighten their grip.

US Treasury doubles long-dated bond buybacks: Why are yields rising again?

US Treasury yields stabilize on Thursday after Wednesday’s sharp decline, with the 10-year yield edging back up to 4.672%. The US Treasury doubled the size of some long-dated debt buybacks, a surprise decision that helped ease the recent surge in yields.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.