GBP/USD Tanks As Dollar Rebounds After CPI Report

Summary:

GBP/USD is having a pullback due to a strong rebound in the DXY index after the release of September CPI report in the US.

The cable pair slid drastically after the US reported its CPI data for September. The GBP/USD pair’s six-day recovery streak was broken by negative price action on Thursday, which pushed the exchange rate 1.11% down to the $1.2177 level.

After the release of September’s CPI data, the DXY index bounced from its fresh weekly lows. The dollar strength index was up 0.6% till press time. This recovery in the dollar’s strength aided a 0.81% drop in the GBPUSD currency pair on the daily time frame.

Dollar Gains After Positive September CPI Data

On Thursday, the dollar rebounded from its weekly lows after the US reported a greater-than-expected 0.3% inflation rate for September. The YoY inflation also rose to 3.7%, up from the expected 3.6%. This news, coupled with the resilience of the US economy, may increase the chances of the Fed keeping rates high for a longer period.

Investors are keeping a keen eye on the Bank of England’s next move after a spokesperson for the central bank hinted towards a hawkish approach to counter the ever-rising UK inflation. On Thursday, a GDP figure of 0.2% was reported, which met analysts’ expectations.

On the other hand, Industrial and Manufacturing production declined by 0.7% and 0.8%, which paints a negative picture for the UK’s industrial sector. These factors are weakening the pound and acting as headwinds for GBP/USD.

What Is The GBP/USD Forecast?

Due to a major correction in the dollar strength index in the past few days, GPB/USD had a strong rebound from its October lows. The currency pair also made a higher high on the daily time frame, which is a strong indicator of a trend reversal.

The GBP/USD is likely to retest the 200 MA If the DXY takes another nosedive in the coming weeks. However, the factor that will flip the GBP/USD forecast bullish will be the reclaim of the key support level of $1.2425, which is also the January 2023 high.