- Summary:
- UK GDP data sent GBPUSD to the highest level since early March, but the US CPI data holds the key to the pair's trajectory on Thursday.
GBPUSD hit four-month highs on Thursday, driven by multiple forecast-beating economic data. The cable hit 1.2879 before easing to 1.2874, with intraday gains of 0.2 percent. This came as the dollar remained under pressure from expectations of rate cuts, with Fed Chairman Jerome Powell’s Congressional testimony failing to inject new impetus into the market. The pound has made substantial gains against the pound in July, with the GBPUSD up by 1.8 percent heading into the halfway mark this month.
Data released by the Office for National Statistics on Thursday showed that UK’s GDP grew by 0.4 percent month-on-month in May, beating the forecast figure of 0.2 percent, after stagnating in April. Construction output grew by 1.9 percent against the forecast 0.5 percent. However, industrial production missed the forecast, growing at 0.2 percent versus 0.3 percent.
Jerome Powell’s decision to refrain from making a definitive statements regarding a September rate cut was strategic, considering that US Consumer Price Index (CPI) reading will be out on Thursday. The Fed Chairman affirmed this week that the US economy was no longer overheated. However, he cautioned against rushing to slash interest rates before adequate evidence that it was sustainably headed towards the 2 percent target.
Consensus forecasts expect the June headline inflation to come in at 0.1 percent MoM and 3.1 percent YoY. On the other hand, Core CPI is forecast to read 0.2 percent MoM and 3.4 percent YoY. The CPI figures are the highlight of the day, and deviation from the forecast figures will inject fresh volatility into the GBPUSD pair.
Technical analysis
The GBPUSD pair is currently on an upward momentum, and the upside will likely continue if the exchange rate stays above the 1.2866 pivot mark. The first resistance will likely come at 1.2880, but extended control by the buyers could break the resistance and potentially send the pair to 1.2890. Conversely, a move below 1.2866 will signal control by the sellers. That could see the first support established at 1.2850, and a breach below that level could strengthen the downward momentum and invalidate the upside momentum. Also, it could send the pair further down to 1.2837.
