Jump to content

British Pound Down Even as Hot CPI Data Beckons BOE Rate Hikes


Recommended Posts

UK CPI, INFLATION, BANK OF ENGLAND, BRITISH POUND – TALKING POINTS:

  • British Pound down despite hotter-than-expected inflation data
  • Spotlight turns to fiscal policy as Sunak readies Sprint Statement
  • GBP/USD has a long way to go to neutralize the downtrend
 

The British Pound spiked briefly higher, then slipped to session lows as hotter-than-expected UK CPI data failed to make an impression on Bank of England policy bets. The core rate of inflation rose to 5.2 percent year-on-year in February, topping baseline expectations of a more modest 5 percent result.

While this marks the fastest pace of price growth in 30 years, the data’s implications seem to be adequately embedded into the markets’ Bank of England policy expectations. These call for between 5-6 further rate hikes of 25bps each before the end of the year. That seems to be aggressive enough for traders, at least for now.

British Pound Down Even as Hot CPI Data Beckons BOE Rate Hikes

British Pound index 1min chart created with TradingView

Looking ahead, all eyes are on the Chancellor of the Exchequer Rishi Sunak, who will deliver the government’s Spring Statement. It is expected to deliver a raft of programs to help households cope as inflation drives up cost-of-living expenses. Energy costs may be a particular focus.

This makes for a tricky policy mix. Embracing an expansionary fiscal stance runs the risk of fanning the flames of price growth, compounding the issue further and demanding still-swifter action from the BOE. To that end, traders will be keen to weigh up the ambition of Mr Sunak’s proposals.

 

GBP/USD TECHNICAL ANALYSIS

Prices have staged a recovery following a test of the 1.30 figure. The bulls now face a formidable challenge on approach to a dense resistance area capped at 1.3412. Breaking above that may set the stage for a test of 1.3523. Neutralizing the dominant downtrend seems to demand a further push north of the 1.36 mark, however.

On the downside, initial support looks to be anchored at 1.3161. Taking that out sees a minor inflection point at 1.3082 along the way back to challenge the key swing bottom at 1.30.

British Pound Down Even as Hot CPI Data Beckons BOE Rate Hikes

GBP/USD daily chart created with TradingView

FX TRADING RESOURCES

--- Written by Ilya Spivak, Head of Greater Asia at DailyFX.com. 23rd March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      20,043
    • Total Posts
      88,064
    • Total Members
      69,036
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    sh3vu2
    Joined 29/09/22 13:35
  • Posts

    • Hi @HYDROCARBON Your requests have been submitted. Thank youAll the best - MongiIG
    • BRENT CRUDE OIL (LCOC1) TALKING POINTS Demand-side factors continue to dominate. Will OPEC trim supply again? BRENT CRUDE OIL FUNDAMENTAL BACKDROP Brent crude oil rallied yesterday on the back of a weaker U.S. dollar coupled with a notable decrease in U.S. crude oil stockpiles as revealed in the EIA weekly report. This morning has seen a resumption of the downward trend as the dollar is bid once more, making yesterday’s move largely attributed to oversold levels as well as quarter-end rebalancing. Markets are still focused on demand destruction and a global recession as opposed to supply-side concerns. Full article: Sep 29, 2022 | DailyFX Warren Venketas, Analyst
×
×
  • Create New...