- Summary:
- The GBPUSD wavered today ahead of the BOE interest rate decision. The price reacted to the weak inflation data from the United Kingdom
The GBPUSD pair is little changed in the Asian session as traders react to the upbeat US retail sales data and the mixed CPI data from the UK.
UK inflation remains low
Consumer prices were relatively unchanged in the UK in May according to the Office of National Statistics (ONS). The data showed that the headline CPI rose to 0.0% from the previous -0.2% on a month-on-month basis. The number declined from the previous 0.8% to 0.5%. According to the office, the biggest contributor to the change in price was recreation and culture.
On the other hand, core CPI, which excludes the volatile food and energy products declined from the previous 0.1% to 0.0%. On an annualised basis, the core CPI data declined from the previous 1.4% to 1.2%.
In the past decade, the biggest contributor to UK inflation has been housing and household services and transport. However, due to the coronavirus pandemic, these have changed because of falling oil prices and a decline in household utility bills.
Meanwhile, PPI input declined by 10% year on year after falling by 10.2% in the previous month. PPI output, on the other hand declined by 1.4% year on year.
These numbers are important because of the upcoming Bank of England (BOE) decision. The bank will deliver its rates tomorrow and analysts expect the bank will leave rates unchanged. These numbers are significantly below the bank’s target of 2.0%.
US retail sales soar
The GBPUSD pair was also unchanged partly due to the strong retail sales released yesterday. The data showed that the sales rose by double digits in May, an evidence that the US economy was recovering. The numbers were significantly higher than what analysts were expecting.
Meanwhile, other numbers, including industrial production and manufacturing production showed that the US was making some progress.
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GBPUSD technical outlook
The GBPUSD pair is trading at 1.2575, which is slightly above Monday’s low of 1.2450 and yesterday’s high of 1.2686. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. It is also between the 50% and 61.8% Fibonacci retracement level. It is also above the ascending trendline drawn by connecting the lowest points on May 15 and 26 and June 15. The price will likely continue rising as bulls attempt to test the previous high of 1.2713.
On the flip side, a move below 1.2466 will invalidate this trend. This price is at the confluence of the ascending trendline and the 50% Fibonacci retracement level.