Gbp rises slightly as us inflation data signals reduced rate hike pressure

GBPUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	0.02%	2.6 Pips
Week to-date	0.34%	43.6 Pips
March	3.09%	388.6 Pips

Upcoming key events (London Time)

Fri 02:00 PM USD Index of Consumer Sentiment

What happened lately

In February, the U.S. experienced a range of changes in its economic indicators. The Producer Price Index (PPI) excluding Food and Energy sectors saw a decrease in several metrics. The monthly PPI excluding these sectors dropped to -0.1% from the previous month’s revised 0.5%. Over a 12-month period, the PPI excluding Food and Energy fell to 3.4% from 3.8% in January. The overall PPI for February remained constant at 0%, descending from a revised 0.6% in January. The Monthly Treasury Budget Statement significantly dropped to -$307 billion compared to January’s -$129 billion, emphasizing fiscal challenges. Furthermore, the Consumer Price Index (CPI) demonstrated a decline in inflation rates. The 12-month CPI Inflation Rate decreased to 2.8% from January’s 3%, while the one-month rate dropped to 0.2% from 0.5%. When excluding Food and Energy, the 12-month CPI inflation rate fell to 3.1% from 3.3%, and the one-month rate decreased to 0.2% from 0.4%. Additionally, the U.S. Initial Unemployment Insurance Claims slightly decreased by 1K, from 221K to 220K, indicating minor improvements in labor market conditions.

The recent economic data from the U.S. indicates a slowing inflation, which reduces the pressure on the Federal Reserve to pursue aggressive rate hikes. The declining inflation rates and stagnant PPI figures suggest that price levels are stabilizing, reducing the urgency for monetary policy tightening. This development can lead to a softer U.S. dollar, benefiting currencies like the British Pound in the GBPUSD pair. Consequently, the marginal rise in GBPUSD to 1.29630 can be attributed to this dynamic, as a weaker dollar tends to enhance the value of GBP against USD. The upcoming release of the USD Index of Consumer Sentiment could also influence GBPUSD movement, depending on the sentiment results. A higher consumer confidence could bolster the dollar, potentially reversing some of the GBP’s gains, while lower sentiment might further weaken USD, benefiting GBP.

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What can we expect from GBPUSD today?

GBPUSD on Thursday rose 0.02% to 1.29630. Price is above 9-Day EMA while Stochastic is falling in overbought zone.

Updated daily direction for GBPUSD looks mixed as the pair is likely to consolidate above 1.29596 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.29671 or trades above daily pivot 1.29634. Break above could target R1 at 1.29667. While to the downside, we are looking at 1.29596 (S1) and daily low of 1.29600 as support levels. GBPUSD need to break on either side to indicate a short-term bias. A break above 1.29671 may suggest continuation after recent positive movement.

For the week to-date, take note that GBPUSD is bullish as the pair continued to trade higher and is up by 0.34% over the past few days.

Key levels to watch out:

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