- Summary:
- The GBPUSD pair was under pressure as March CPI data came in line with estimates but dropped from the previous month. Brexit talks are being watched
The GBPUSD pair rose slightly as the market reacted to the latest consumer price index data released by the ONS. These numbers are important because they measure the amount of inflation in the country.
In March, consumer prices rose by an annualized rate of 1.5%, which was slightly below the previous month’s 1.7%. According to ONS, consumer prices rose mostly because of higher costs of electricity and water. They were partially offset by a decline in motor fuels and clothing. The closely watched core CPI data rose by 1.7% after rising by 1.6% in the previous month.
The ONS also released the PPI input and output data for March. The PPI input, an important number that measures price of goods and raw materials bought by manufacturers declined by 3.9% while PPI output was unchanged at -0.2%. The change in these prices was mostly attributed to a decline in oil prices. As I reported earlier, the price of crude oil continued to drop as investors worried about demand.
The UK has been severely hit by the current coronavirus pandemic. The country has lost thousands of people and the number of infections is increasing. This has seen the government increase the number of days that people will remain on lockdown.
Meanwhile, tough discussions are going on about Brexit. Little has been shared to the press since the meetings started this week. Still, there are chances that talks will be difficult and possibly lead to a deadlock because of the tough conditions both sides have issued. For example, the UK has said that it will not belong to the European Court of Justice under any condition. Similarly, the country has ruled out applying EU standards on its goods and services. Instead, it has offered to apply its own rules as other countries that deal with the UK do.
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GBPUSD Technical Outlook
The GBPUSD pair rose slightly after the ONS released mixed inflation numbers for March. Looking at the four-hour chart, we see that the pair found significant resistance at around the 1.2643 level on Monday. Today, the pair found an important support at the 50% Fibonacci Retracement level.
This retracement was drawn by connecting the YTD highs and lows. The price has also moved below the Ichimoku cloud. Therefore, I expect the downward trend to continue, which will likely see the pair test the 38.2% retracement at 1.2087.