The GBP/USD exchange rate wavered on Thursday after the US published strong consumer inflation data. The pair remained at the psychologically-important level at 1.2700, where it has been at in the past few days. The focus now shifts to the upcoming UK GDP numbers.
US inflation dataInflation in the US is still sticky, putting the Fed’s planned rate cuts at risk. According to the Bureau of Labor Statistics (BLS), the headline Consumer Price Index (CPI) rose from 0.1% in November to 0.3% in December, higher than the expected 0.2%. It rose by 3.2% from the same period in 2022.
The report also showed that core inflation, which excludes the volatile food and energy prices, remained unchanged at 0.3%. It then retreated from 4.0% to 3.9% on a YoY basis. This retreat was also smaller than what analysts were expecting.
Most of this inflation was in the housing sector as rents have continued rising. The US housing sector is facing challenges because of low inventories in key places. Services inflation has also continued rising.
These numbers, coupled with the strong US non-farm payrolls (NFP) report, mean that the Federal Reserve has more work to do. While rate hikes have ended, the bank will likely maintain them at the current level for a while. The bank will also continue with its quantitative tightening policy.
The next important GBP/USD news will be the upcoming UK GDP numbers scheduled for Friday. Economists expect the report to show that the economy expanded by 0.2% in November after contracting by 0.3% in the previous month.
They also expect the report to show that manufacturing and industrial production rose by 0.3% and 0.7%, respectively. Construction output is expected to come in at 1.3%, an improvement from 1.1% in October.
GBP/USD technical analysis
The GBP/USD exchange rate has been in an uptrend in the past few days. It has risen from the YTD low of 1.2610 to 1.2730. It has also formed a rising wedge shown in blue and remained above the 50-period moving average. The pair is also above the ascending trendline that connects the lowest swings since October 26th last year.
Therefore, the outlook for the pair is mildly bearish after the strong US inflation numbers. If this happens, the next point to watch will be at 1.2610, the lowest swing on January 2nd. This price is about 1% below the current level.
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