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Pound Sterling recovers losses against US Dollar as US inflation rose expectedly

  • The Pound Sterling ticks higher to near 1.2770 against the US Dollar after the US inflation data rose expectedly in November.
  • Economists expect the Fed to cut interest rates by 25 bps after the policy meeting on December 18.
  • Investors await the UK monthly GDP data to get cues about the current status of the economy.

The Pound Sterling (GBP) recovers intraday losses and edges higher to near 1.2770 against the US Dollar (USD) in Wednesday’s North American session. The GBP/USD pair moves higher after the release of the United States (US) Consumer Price Index (CPI) data for November, which showed that inflationary pressures rose in line with expectations.

The inflation report showed that the annual headline CPI accelerated at a faster pace to 2.7%, as expected, from the October reading of 2.6%. The core CPI – which excludes volatile food and energy prices – grew steadily 3.3%. The month-on-month headline and core CPI rose expectedly by 0.3%.

Sticky US inflation data has boosted expectations that the Federal Reserve (Fed) will reduce its key borrowing rates by 25 basis points (bps) to 4.25%-4.50 in the policy meeting on December 18.

According to the latest Reuters poll, 90% of economists expect that there will be a 25-basis points (bps) interest rate reduction next week. The poll also showed that a majority of economists expect the Fed to pause the policy-easing spree from the first policy meeting of 2025 in January, assuming that policies of higher import tariffs and lower taxes by US President-elect Donald Trump will be inflationary.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.02%0.02%0.21%-0.04%0.19%0.10%-0.11%
EUR-0.02% 0.00%0.19%-0.06%0.16%0.07%-0.15%
GBP-0.02%0.00% 0.19%-0.06%0.16%0.07%-0.16%
JPY-0.21%-0.19%-0.19% -0.24%-0.02%-0.11%-0.33%
CAD0.04%0.06%0.06%0.24% 0.22%0.14%-0.10%
AUD-0.19%-0.16%-0.16%0.02%-0.22% -0.08%-0.28%
NZD-0.10%-0.07%-0.07%0.11%-0.14%0.08% -0.22%
CHF0.11%0.15%0.16%0.33%0.10%0.28%0.22% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Daily digest market movers: Pound Sterling awaits UK monthly GDP, factory data

  • Like the US Dollar, the Pound Sterling is also struggling for a direction against other major currencies amid the light United Kingdom (UK) economic calendar. Therefore, the British currency will be influenced by market expectations for the Bank of England’s (BoE) likely interest rate action in the policy meeting on December 19.
  • Traders expect the BoE to leave interest rates unchanged at 4.75% next week as price pressures persist. Ahead of the BoE policy decision, employment data for three months ending October and the Consumer Price Index (CPI) data for November will be released, which could influence BoE interest rate expectations.
  • Meanwhile, growing concerns over UK labor market strength could compel BoE officials to deliver a dovish interest rate guidance. A recent survey by the BoE Decision Maker Panel (DMP) showed that one-year forward employment growth expectations fell to four-year lows. 
  • Later this week, investors will focus on the UK monthly Gross Domestic Product (GDP), and Industrial and Manufacturing Production data for October. The GDP and factory data will show the current status of economic health. Economists expect the factory and GDP data to have expanded after declining in September.

Technical Analysis: Pound Sterling holds key 20-day EMA

The Pound Sterling strives to reclaim the key resistance of 1.2800 against the US Dollar. The GBP/USD pair holds slightly above the 20-day Exponential Moving Average (EMA) around 1.2720.

The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.

Looking down, the pair is expected to find a cushion near the upward-sloping trendline around 1.2500, which is plotted from the October 2023 low near 1.2035. On the upside, the 200-day EMA around 1.2830 will act as key resistance.

Economic Indicator

Gross Domestic Product (MoM)

The Gross Domestic Product (GDP), released by the Office for National Statistics on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in the UK during a given period. The GDP is considered as the main measure of UK economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a rise in this indicator is bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Read more.

Next release: Fri Dec 13, 2024 07:00

Frequency: Monthly

Consensus: 0.1%

Previous: -0.1%

Source: Office for National Statistics

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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